A customer exits a Starbucks store in Manhattan on Jan. 30, 2024, in Latest York City.
Spencer Platt | Getty Images
Wall Street is shaking off Starbucks’ weak quarterly report, seemingly taking executives at their word that the corporate’s challenges are “transitory.”
The coffee giant’s stock ticked higher in morning trading, hours after it reported fiscal first-quarter earnings and revenue that missed Wall Street’s estimates and lowered its full-year sales outlook.
Shares closed Wednesday down about 1%. Including Wednesday’s move, shares have fallen about 14% over the past yr, dragging the corporate’s market cap right down to roughly $105 billion.
Some investors had prepared themselves for worse news on Tuesday evening. Morgan Stanley analyst Brian Harbour wrote in a note to clients that the corporate’s earnings per share and U.S. same-store sales growth was higher than some had feared, “likely supporting the stock.”
Starbucks CEO Laxman Narasimhan blamed three headwinds for the disappointing results: war within the Middle East weakening its local licensees’ sales, “misperceptions” within the U.S. over the corporate’s stance on the Israel-Hamas war, and a “more cautious” consumer in China.
Executives also tried to convey that those challenges are expected to subside as fiscal 2024 progresses.
Starbucks is already attempting to bring back its U.S. customers through promotions and social media spending that clarifies its position on the Middle East. Executives also said the corporate has several latest drinks on the way in which, which could attract the occasional customers.
While Starbucks lowered its full-year outlook for revenue and same-store sales growth, it reiterated its forecast for fiscal 2024 earnings per share growth. BMO Capital Markets analyst Andrew Strelzik wrote that investors were likely expecting the corporate to lower its earnings outlook as well, so reaffirming that forecast could lift the stock price within the near term.
Others took that as an indication of the corporate’s overall strength.
“[It illustrates] the multifaceted strength of Starbucks’s business model and its ability to deliver results even in a more erratic top-line environment,” William Blair analyst Sharon Zackfia wrote in a note to clients.
