Citigroup (C) has lowered its price target on retail coffee chain Starbucks (SBUX), saying it expects the company to report “messy” earnings for this year’s third quarter.
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Analysts maintained a Hold-equivalent neutral rating on SBUX stock. However, the Wall Street bank lowered its price target on Starbucks’ shares to $84 from $99. The new price target is 6% higher than where Starbucks’ stock currently trades.
Analysts at Citigroup said they dropped their price target on SBUX stock because the company’s turnaround strategy that is now underway is likely to negatively impact the coffee chain’s upcoming third quarter print.
Cost Cuts
Starbucks is scheduled to announce its Q3 results on Oct. 29. Citigroup’s bearish outlook on the company and stock comes after Starbucks recently announced plans to close underperforming stores and reduce its headcount as it looks to cut costs.
At the end of September, Starbucks announced that it is closing underperforming stores and eliminating jobs as part of a comprehensive restructuring plan. Most of the store closures and job cuts are occurring in the U.S. and Canada, with plans to eliminate about 900 jobs across Starbucks’ support teams.
Is SBUX Stock a Buy?
The stock of Starbucks has a consensus Moderate Buy rating among 21 Wall Street analysts. That rating is based on 13 Buy, six Hold, and two Sell recommendations issued in the last three months. The average SBUX price target of $101.11 implies 28.07% upside from current levels.
