By Sam Boughedda
Starbucks' (NASDAQ:SBUX) path towards a full recovery "will be hard," said Bernstein analysts in a note to clients on Tuesday.
Analysts who have a Market-Perform rating and a $102 per share price target on Starbucks shares, told investors that Starbucks has a downward guidance revision risk.
"The news of China reopening helped SBUX rally with a +5% since the end of the Zero-covid policy was announced, but the 1Q23 results have demonstrated that the path toward full recovery will be hard," the analysts wrote. "We estimate that the comp miss in 1Q, weak China commentary for 2Q and consequent sales deleverage generated a $0.18 EPS deficit (vs. lower-end of EPS guide) to be covered in 3 quarters."
They also explained that post-earnings, the consensus $3.39 EPS estimate has "not materially changed," suggesting elevated expectations at the back of the year.
"Covering the gap implies that in the back half of the year, EPS need to be $2+, a level seen only once in the past 10+ years," they stated.
Bernstein believes that an acceleration in the China recovery, increased sales growth ex-China, or improvements in restaurant margins are the main levers for Starbucks to meet the EPS guidance, but they "all present challenges."