Starbucks (SBUX) PT Lowered to $95 at Guggenheim

Guggenheim analyst Gregory Francfort lowered the price target on Starbucks (NASDAQ: SBUX) to $95.00 (from $107.00) while maintaining a Neutral rating.

The analyst commented, "Starbucks announced this week that CEO Kevin Johnson will step down and retire after serving as CEO since 2017. Founder Howard Schultz will return on an interim basis for his third stint at the helm. Over the past five years, Johnson’s strategy has realigned Starbucks’ company unit exposure to the U.S. and China, focused growth on the core retail operations and trimmed projects like Starbucks Reserve, the Roasteries, and Princi. SBUX has navigated the pandemic well in the U.S. but headwinds in China and an emergence of a unionization push in the U.S. add to overall industry challenges of a tight labor market and global supply chain disruptions. We think the management change increases the likelihood of a meaningful cut to the medium-term earnings guidance as we expect the next CEO to feel less obligated to defend an 18-19% EBIT margin at the expense of long-term revenue growth. We cut our below-consensus EPS for each of F’2022 and F’2023 by $0.10 to $3.20 and $3.70, respectively. We lower our price target to $95 from $107 due to the lower estimates as well as a 25x multiple on C’23 EPS (rather than 27x) due to greater uncertainty on China, earnings revision risk, and cost headwinds."

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