It’s time to move to the sidelines on Starbucks , according to Jefferies. Analyst Andy Barish downgraded the coffee chain to hold from buy, saying shares are likely going to trade in a narrow range after their outperformance this year. “With SBUX stock up +40% since the YTD low in May (S & P -2.8%), we move to the sidelines, with our Buy rating going to Hold, as the risk/reward now appears balanced following investments into the biz and growth concerns earlier this year,” Barish wrote in a Wednesday note. Additionally, the analyst is concerned a recession in the second half of calendar year 2023, or in the first half of 2024, will hurt discretionary spending and same-store sales at the coffee chain. “We lower our U.S. SSS ests to account for this via negative transaction growth, although it may come in the form of softer avg check as well, which has been significant in the form of price, premiumization, cold, and modifiers. Our FY23/24 U.S. SSS ests are 7%/5% vs guide 7-9% in each year and Cons 8%/6%,” Barish wrote. Meanwhile, the analyst expects that Starbucks set its expectations for global growth too high at its Investor Day, saying it could face “some degree of risk,” especially in a dwindling economy. To be sure, the analyst noted that a reopening in a China could provide a boost to shares. Starbucks shares are down about 16% in 2022, better than the S & P 500’s more than 19% decline. The analyst’s $100 price target is just 2% above Tuesday’s closing price at $98 per share. The stock was down 0.8% in Wednesday premarket trading. —CNBC’s Michael Bloom contributed to this report.
