Consumer Discretionary

Starbucks wants to make occasional customers into regulars. It saw unexpected headwinds in 1Q, with one factor being occasional U.S. customers who tend to visit stores in the afternoon came in less frequently. Starbucks implemented targeted offers aimed at bringing those customers into its loyalty program, which it says has been shown to create a long-term relationship that increases both ticket and transactions. CEO Laxman Narasimhan says the initiatives have led to more occasional customers beginning to rebound in December. “We feel good about the trajectory over the course of the quarter, but it will take time for our plans to be fully realized,” Narasimhan says.

Starbucks attributes its portfolio of cold beverages to a shift in generational taste preferences in response to a question on its earnings call. An analyst, who estimates that since 2016 US cold drink sales have grown while hot drink sales have declined, asks if Starbucks has less of an everyday hot drink customer and more of a new type of customer who comes in less frequently and opts for cold drinks. CMO Brady Brewer notes that the coffee chain doesn’t see a trade-off in frequency between cold beverage customers and hot beverage customers. He adds that with cold beverages there are infinite possible customizations, offering a great opportunity. “On hot beverage, I would say we’re not leaving that customer behind. We’re continuing to innovate on hot beverages,” says Brewer.

Starbucks’ (SBUX) fiscal Q1 results and the accompanying commentary were more “constructive” than expected, while the early part of Q2 presents challenging trends in China and the Middle East, Morgan Stanley said Wednesday in a report. Starbucks acknowledged hurdles in its Middle East licensed business due to boycotts of US brands, and the company previously cited China concerns, Morgan Stanley said. The company is introducing product innovations to address these issues in the short term, though same-store sales assumptions were adjusted downward, the report said. Starbucks expects low single-digit percentage growth in China’s same-store sales for the rest of the year, down from 4% to 6% anticipated previously, and Q2 expectations are lower, likely flat or negative, before a potential improvement in H2, the report said. North American same-store sales grew 5% in Q1, topping estimates by investors, the report said. “Starbucks called out the strength of its most loyal

Starbucks (NASDAQ:SBUX) Stock Analyst Ratings Date Upside/Downside Analyst Firm Price Target Change Rating Change Previous / Current Rating 01/31/2024 15.51% Barclays $116 → $112 Maintains Overweight 01/19/2024 3.14% Piper Sandler $107 → $100 Maintains Neutral 01/18/2024 -2.02% Wedbush $100 → $95 Maintains Neutral 01/16/2024 — Gordon Haskett Downgrades Buy → Hold 01/16/2024 23.76% Morgan Stanley $112 → $120 Upgrades Equal-Weight → Overweight 12/20/2023 10.35% HSBC → $107 Initiates Coverage On → Hold 11/06/2023 9.32% Wedbush $100 → $106 Maintains Neutral 10/23/2023 19.64% Barclays $123 → $116 Maintains Overweight 10/19/2023 21.7% Deutsche Bank → $118 Initiates Coverage On → Buy 10/12/2023 3.14% UBS $110 → $100 Maintains Neutral 10/11/2023 5.2% Morgan Stanley $104 → $102 Maintains Equal-Weight 10/05/2023 3.14% Citigroup $104 → $100 Maintains Neutral 09/25/2023 7.26% Citigroup $112 → $104 Maintains Neutral 09/22/2023 10.35% TD Cowen → $107 Reiterates Market Perform → Market Perform 09/20/2023 10.35% TD Cowen → $107

Barclays analyst Jeffrey Bernstein maintains Starbucks (NASDAQ:SBUX) with a Overweight and lowers the price target from $116 to $112.

Wedbush analyst Nick Setyan reiterates Starbucks (NASDAQ:SBUX) with a Neutral and maintains $95 price target.