On Friday, Morgan Stanley adjusted its outlook on Starbucks Corporation (NASDAQ:SBUX), reducing the coffee giant's share price target to $115 from the previous $120 while retaining an Overweight rating.
The firm's analysis indicates a revision of the second quarter and full-year estimates to figures that fall below the company's own guidance. The report suggests that investor expectations might be even lower, but Morgan Stanley sees a favorable risk/reward balance for the stock.
The focus on costs was highlighted as a key factor that could impact the company's financial guidance going forward. According to the firm, these costs will play a critical role in determining whether Starbucks' guidance will be adjusted. The firm's evaluation also included an examination of recent survey results from Morgan Stanley's research in China and Nielsen data concerning the market for bottled beverages.
The survey and data analysis are part of the firm's comprehensive review of Starbucks' market position and potential headwinds or tailwinds for the company. While the price target has been lowered, the Overweight rating suggests Morgan Stanley still believes Starbucks shares have a potential upside compared to the market.
The adjustment in Starbucks' price target by Morgan Stanley comes with particular attention to its performance in China, a significant market for Starbucks, and its bottled beverage segment. The firm's commentary indicates a belief that despite lowering estimates, the investment case for Starbucks remains strong.
Investors and market watchers will be closely monitoring Starbucks' upcoming financial reports to see how the company's performance aligns with these revised expectations.
InvestingPro Insights
In light of Morgan Stanley's recent adjustments to Starbucks Corporation's (NASDAQ:SBUX) outlook, real-time data and insights from InvestingPro can provide investors with additional context. With a market capitalization of $97.26 billion and a P/E ratio of 23, Starbucks is positioned as a significant player in the industry. Notably, the company has been profitable over the last twelve months, with a revenue growth of 11.46%, showcasing its ability to expand in a challenging market environment.
InvestingPro Tips highlight that Starbucks has raised its dividend for 14 consecutive years and is trading at a low P/E ratio relative to near-term earnings growth, which could indicate an attractive investment opportunity for dividend-seeking investors. Additionally, the company's stock is currently in oversold territory according to the RSI, suggesting potential for a rebound. For those seeking more comprehensive analysis, InvestingPro offers further tips and metrics, including the fact that Starbucks operates with a moderate level of debt and that analysts predict the company will be profitable this year. To explore these insights in greater depth, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a total of 11 InvestingPro Tips for Starbucks.
As Starbucks approaches its next earnings date on April 25, 2024, these metrics and insights can help investors make informed decisions in the context of the company's recent performance and Morgan Stanley's updated analysis.
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