Why Goldman Sachs Downgraded Starbucks Today



Goldman Sachs’s downgrade

Today, Goldman Sachs downgraded Starbucks (SBUX) from a “buy” to a “neutral” due to concerns about its expansion in China, Starbucks’s second-largest market. Goldman Sachs also lowered its price target from $75 to $68. The new price target represents a potential upside of 5.9% from the stock’s January 10 closing price of $64.19.

As reported by CNBC, Goldman Sachs analyst Karen Holthouse wrote in a research note, “The recent AAPL [Apple] announcement (while potentially also product-driven) cited trade concerns/macro, and MCD [McDonald’s] acknowledged softer trends in the region at a late November event. The GS macro team also expects a continued slow down in GDP, at least partially driven by consumption.”

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Other analysts’ recommendations

Of the 33 analysts that follow Starbucks, 48.5% are favoring “buys,” 48.5% are favoring “holds,” and 3.0% are favoring “sells” on the stock. On average, analysts have given SBUX a price target of $68.44, which represents a potential upside of 6.6% for the stock.

Since the company’s investors meeting on December 13, Morgan Stanley, Barclays, Stifel, JPMorgan Chase, BMO, Wells Fargo, and RBC have all raised their price targets on its stock. On January 10, Morgan Stanley raised its price target from $64 to $70. Barclays raised its price target from $65 to $69 on December 19.

Stock performance

The downgrade appears to have negatively affected Starbucks stock. Today, it was trading down ~2.7% in premarket trading hours. Since the beginning of 2019, it’s fallen 0.3% as of its January 10 closing price. During the same period, its peers McDonald’s (MCD) and Dunkin’ Brands (DNKN) have returned 2.2% and 9.5%, respectively.

The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests ~7.5% of its holdings in restaurant and travel companies, has returned 5.5% year-to-date.


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