(Bloomberg) — It’s too early to get excited about Starbucks Corp.’s prospects for a turnaround even with a new chief executive officer in charge, Jefferies analysts said, assigning a rare sell-equivalent rating to the struggling coffee chain operator.
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Starbucks shares surged 24% through Monday’s close since the sudden replacement of its CEO with Chipotle Mexican Grill Inc.’s Brian Niccol in August. Yet for Jefferies’ Andy Barish, this rally is “overdone,” given the path to improving the business isn’t a straightforward one.
“While the new CEO suggests necessary strategic change is now on the table, we believe execution will be challenged as issues like ops, culture, value perception and tech take time to fix,” Barish said in a research note. His lowered price target of $76, a Street low, sees the stock falling 20% over the next 12 months from Monday’s closing price of $95.48.
While fellow Wall Street analysts have rushed to upgrade Starbucks since the leadership change, Barish cut Starbucks to underperform. That’s one of only two sell-equivalent ratings, according to data compiled by Bloomberg, and the analyst’s first since initiating coverage of the US firm in 2011.
Starbucks shares remain in negative territory for the year as the coffee roaster struggles to stem a decline in sales, with customers baulking at splashing out on pricey lattes. The stock fell 2.2% in premarket trading Tuesday in New York.
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