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Why Starbucks Stock Is Falling Today

By Joe Tenebruso – Updated Jun 11, 2020 at 4:04PM

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The coronavirus is taking a heavy toll on the coffee giant's business.

What happened

Shares of Starbucks (SBUX -0.40%) declined on Thursday after the global coffeehouse chain warned investors that COVID-19 could dent its sales by as much as $3.2 billion in the fiscal third quarter. As of 3:13 p.m. EDT, Starbucks stock was down more than 7%. 

So what

Starbucks said on Wednesday that its comparable-store sales in the U.S. and China could fall as much as 20% in fiscal 2020, due to coronavirus-related store closures. 

In addition to the sales declines, Starbucks also expects to generate a loss in the third quarter. The coffee titan said its operating income could fall by as much as $2.2 billion, which would result in a projected net loss between $0.64 and $0.79 per share. 

A finger pointing to a stock chart that rises then falls.

Starbucks' stock fell on Thursday on COVID-19 concerns. Image source: Getty Images.

On Thursday, KeyBanc Capital analyst Eric Gonzalez cut his rating on Starbucks' stock from overweight to sector weight. Gonzalez said he remains bullish on Starbucks' long-term future, but he's concerned about the near term given the company's coronavirus-related sales challenges and the stock's high valuation after rallying from its lows in March. 

Now what

The next few quarters are likely to be challenging for Starbucks and many other restaurant chains, particularly if coronavirus case counts continue to rise rapidly. Starbucks is attempting to adapt to a post-pandemic world by closing underperforming stores and expanding its takeout, drive-through, and delivery offerings. But until a vaccine or effective treatment for COVID-19 is found, Starbucks' core in-cafe business will likely continue to suffer.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.

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