Goldman Sachs has recently downgraded Starbucks Corporation (NASDAQ: SBUX) from “Buy” to “Neutral,” adjusting its price target to $85. The downgrade reflects mounting concerns about the company’s weakening growth trajectory and a valuation that appears stretched relative to peers.
📊 Starbucks delivered a disappointing fiscal fourth-quarter performance, with earnings per share coming in at $0.80 versus the expected $1.03. Revenue also fell short, landing at $9.1 billion against the forecasted $9.38 billion. In a notable move, the company suspended its fiscal 2025 guidance, signaling internal shifts and a more cautious near-term outlook under the direction of new CEO Brian Niccol.
💸 Despite these hurdles, Starbucks raised its quarterly dividend from $0.57 to $0.61 per share, pushing its forward dividend yield to approximately 2.78%. While this may appear attractive to income-focused investors, it comes with an elevated payout ratio of 85.2% — a sharp contrast to the Consumer Cyclical sector average of 43.1%. This suggests the company is committing a significant portion of its earnings to dividends, leaving less room for strategic reinvestment or navigating economic uncertainty.
📌 The downgrade reflects a blend of softer financial performance, increased shareholder payouts, and limited near-term visibility on growth. Investors will be watching closely to see if Starbucks can reignite brand momentum and drive sustainable returns under its new leadership.