Jefferies downgraded Starbucks from Hold to Underperform, lowering its price target to $76, on worries that the coffee giant’s growth may be reaching its limits. Analysts are increasingly cautious about Starbucks’ ability to sustain same-store sales growth, particularly as consumers resist higher prices. Pressure is rising from competitors offering more affordable alternatives, making it difficult for Starbucks to defend its premium pricing strategy without losing customers.
While Starbucks continues innovating with new espresso drinks and ready-to-drink products, Jefferies questions whether these initiatives will provide enough upside to offset ongoing margin pressures driven by inflation. As input costs rise, margins are narrowing, forcing Starbucks to increase investments just to maintain existing growth levels. Jefferies highlighted that expectations around Starbucks’ global expansion and product innovation may already be factored into the stock price, leaving limited room for upside in the near term.
☕ Dividend Fundamentals:
🏷️ Quarterly dividend: $0.55 per share
💰 Annual dividend: $2.20 per share, yielding approximately 2.4%-2.5%
🔄 Payout ratio: Around 45%-50%, maintaining healthy dividend coverage
📈 Dividend growth: Consistent increases supported by strong cash flow and stable earnings
Jefferies’ downgrade underlines the challenges Starbucks faces in a tougher consumer environment, emphasizing the importance of careful execution to support both share price appreciation and dividend sustainability.