Starbucks is downgraded at TD Cowen due to China headwinds
Bruce Bennett
TD Cowen moved to the sidelines on Starbucks Corporation (NASDAQ:SBUX) on Tuesday with a downgrade to a Market Perform rating from Outperform.
Analyst Andrew Charles and team pointed to worrisome macro and competitive pressures that are anticipated to challenge same-store sales growth in China, and lead to pressure on SBUX's multiple. "While we forecast consensus 2023-25E EPS is achievable, in our view the multiple isn't discounted enough vs the 5Y avg that leads us to expect shares will be in a holding pattern," warned Charles.
The firm lowered its China comparable sales estimate for 2024 14% vs. 26% prior and 16.5% consensus. The 2025 comparable sales estimate was dropped to 5% from 9.5% prior and the consensus mark of 5.5%. One of the factors seen coming into play is low-priced competition that is gaining share, with aggressive discounts that are poised to persist for the next two years and beyond. China macro headwinds are also seen boding poorly for consumer spending. TD Cowen is more bullish on the U.S. business, where it models comparable sales in line with consensus for 2024-25.
Shares of Starbucks (SBUX) fell 1.25% in premarket action on Tuesday to $95.55. The coffee chain stock is down more than 4% on a year-to-date basis and trades below its 200-day moving average.

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