Starbucks Downgraded

Morgan Stanley is opining that Starbucks’ (NASDAQ: SBUX) growth trends will not turnaround anytime soon after the company’s sales guidance reduction

The firm lowered its rating to equal-weight from overweight for Starbucks shares, citing the deteriorating sales growth in China and the U.S.

On Tuesday Starbucks lowered its global third-quarter same store sales growth forecast to 1% versus the previous forecast of 3%.

“Facing now what is clearly decelerating top-line in its two key markets, SBUX is now saddled with increased EPS risk and a poor recent track record of driving sales,” analyst John Glass said in a note to clients Wednesday.

“We see this stock as range bound, at best, near-term as the catalyst for a US comp recovery remains elusive, offset by a valuation that has been compressing over the past 2+ years.”

Starbucks shares are down $3.38, or 5.9%, to $54.05 in Wednesday’s mid-morning session.

Glass reduced his price target to $59 from $72 for Starbucks shares, representing 3% upside to Tuesday’s close.

In a similar move, Telsey Advisory Group lowered its rating to market perform from outperform and reduced its price target to $60 from $70 for Starbucks shares Tuesday, predicting more mixed sale results in China.

This week, Starbucks announced a set of strategic priorities and corresponding operational initiatives to accelerate growth and create long-term shareholder value.

Among them, accelerating growth in the U.S. and China, the company’s targeted long-term growth markets; expanding and leveraging the global reach of the brand through the Global Coffee Alliance; and sharpening the focus on increasing shareholder returns.

This article provided by NewsEdge.