A customer leaves a Starbucks store in Manhattan on January 30, 2024, in New York City.
Spencer Platt | fake images
Wall Street is shaking Starbucks' weak quarterly report, apparently taking executives at their word that the company's challenges are “transitory.”
Shares of the coffee giant rose in morning trading, hours after it reported fiscal first-quarter earnings and revenue that missed Wall Street 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 year, dragging the company's market capitalization to about $105 billion.
Some investors had braced themselves for worse news Tuesday night. Morgan Stanley analyst Brian Harbor wrote in a note to clients that the company's earnings per share and comparable sales growth in the United States were better than some had feared, “likely supporting the stock.”
Starbucks CEO Laxman Narasimhan attributed the disappointing results to three factors: the war in the Middle East weakening sales of its local licensees, “misperceptions” in the United States about the company's stance on the war between Israel and and Hamas, and a “more cautious” consumer in China. .
Executives also sought to convey that those challenges are expected to ease as fiscal 2024 progresses.
Starbucks is already trying to win back its American customers through promotions and social media spending that clarify its position in the Middle East. Executives also said the company has several new drinks on the way, which could attract casual customers.
While Starbucks lowered its full-year outlook for revenue and same-store sales growth, it reiterated its earnings-per-share growth forecast for fiscal 2024. BMO Capital Markets analyst Andrew Strelzik wrote that Investors likely expected the company to lower its earnings outlook as well, so reaffirming that forecast could lift the stock price in the near term.
Others took it as a sign of the company's overall strength.
“[It illustrates] the multifaceted strength of Starbucks' business model and its ability to deliver results even in a more erratic revenue environment,” William Blair analyst Sharon Zackfia wrote in a note to clients.
