Starbucks jolts: Slower recovery in China and more battling with the baristas union
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BTIG reeled in its estimates slightly on Buy-rated Starbucks (NASDAQ:SBUX) on Tuesday to reflect a modestly slower recovery in China and a lower weighting for the market for FQ3 in comparison to the historic average. While the firm also cut EPS estimates to reflect the softer sales, analyst Peter Saleh and team still believe that a full recovery in China could generate a meaningful tailwind to earnings over both the medium and long term.
On the positive side, Saleh also noted that investors may not be fully appreciating the shift to drive-thru locations in the U.S., which could lead to operating margins above pre-COVID levels.
"Recently, Starbucks' CFO indicated that drive-thrus now account for 70% of the U.S. store base, compared with 60% in 4QF20 (during the pandemic), and 40% in 2015. Drive-thru locations historically generate much higher sales volumes and higher margins across the industry."
BTIG's price target on SBUX of $125 is based on applying a 30.5X multiple to the firm's FY24 EPS estimate of $4.09.
Separately, Starbucks (SBUX) battle with a labor union representing baristas took another twist when the Seattle-based company filed charges with the National Labor Relations Board that Starbucks Workers United's "smear campaign" included deliberate misrepresentations. 
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