Jefferies analysts have stated that it is premature to feel hopeful about Starbucks Corp.’s chances for a recovery, even with a new chief executive officer at the helm. They have issued a rare sell-equivalent rating for the struggling coffee chain.
Starbucks shares have surged 24% since the unexpected replacement of its CEO with Brian Niccol, formerly of Chipotle Mexican Grill Inc., in August. However, Andy Barish from Jefferies believes this rally is “overdone,” as the challenges in improving the business are complex.
“While the new CEO signals that critical strategic changes are on the horizon, we expect difficulties in execution since issues like operations, culture, value perception, and technology will take time to resolve,” Barish noted in a research report. His adjusted price target of $76, which is the lowest on the market, suggests a potential 20% decrease in the stock over the next 12 months from Monday’s closing price of $95.48.
Barish has reduced Starbucks shares to underperform, while other Wall Street analysts have promptly boosted the company in the wake of the leadership change. This marks one of only two sell-equivalent ratings according to Bloomberg data, and it is the first time Barish has issued such a rating since he began covering the US company in 2011.
Starbucks shares continue to be in negative territory this year as the coffee chain grapples with a downturn in sales, with customers reluctant to spend on high-priced lattes. On Tuesday, the stock fell 2.2% in premarket trading in New York.
