Starbucks is lower as Wedbush shifts to neutral rating after buyback suspension
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Wedbush Securities dropped its rating on Starbucks Corporation (NASDAQ:SBUX) to Neutral from Buy after the firm lost conviction that the coffee chain giant is on track to return to low double-digit EPS growth in FY23.
Nick Setyan and team continue to believe valuation largely incorporates the risks ahead, but see no catalysts for the foreseeable future. The suspension by Starbucks (SBUX) of share repurchases is called a surprise.
The FY22 EPS estimate from Wedbush went to $3.30 from $3.33 prior to incorporating the termination of SBUX's share repurchase program. The FY23 EPS estimate went to $3.70 from $3.85.
Wedbush cut its price target on SBUX to $91 from $105.
Price target rationale: "Our PT represents a 24.6x P/E multiple on our lowered FY23 EPS estimate of $3.70. This represents a ~10% discount to SBUX's pre-COVID 5-year median forward P/E of 27.3x (our previous PT was based on an in-line multiple). We now believe a discount is appropriate given a lower EPS growth outlook with the termination of SBUX's share repurchase authorization adding to declining visibility into the performance of SBUX's International and U.S. businesses."
Shares of Starbucks (SBUX) fell 1.52% premarket to $86.75 after shedding 3.72% on Monday. SBUX trades below its 50-day, 100-day and 200-day moving averages.