A Starbucks (SBUX 0.62%) coffee might be a fine way to enhance an investor's day, but we can't say the same about the company's stock so far this week. For the second day in a row, the latte slinger saw its share price decline notably. On Tuesday it fell by 4.5%, a steeper fall than that of the S&P 500 index, on a pair of downbeat new analyst notes.
Probably the more impactful of the two notes was the one from Wedbush's Nick Setyan. The prognosticator has dropped his recommendation on Starbucks by one peg, to neutral from the previous outperform (buy). In doing so, he's reduced his price target to $91 per share; previously it was $105.
Another analyst cooling on the coffee giant Tuesday was BMO Capital's Andrew Strelzik, although his one modification isn't as drastic. He shaved $5 off his price target while maintaining his outperform recommendation, although he has lowered his per-share earnings estimates for the company after it announced it was suspending its stock buyback program.
"We remove share repurchases from our forward estimates and lower our target to $115, but believe risk/reward skews favorably and remain positive on longer-term fundamentals," Strelzik explained.
A longtime investor favorite, Starbucks has been dinged lately by the out-of-left-field resignation of CEO Kevin Johnson and the return of Howard Schultz to that position. Investors are also clearly unhappy with the suspension of the stock buyback program, as such initiatives are considered to be supportive of a company's share price.
Starbucks bulls shouldn't be too spooked by any of this, however. Schultz is a steady hand that knows the business cold, and the company can plow the buyback money into investments that actually grow its fundamentals. I wouldn't bail on these latest developments, or on the adjustments of the two analysts.