Starbucks downgraded to "sector perform" - update

17.12.07 - RBC Capital Markets

NEW YORK, December 17 (newratings.com) - Analysts at RBC Capital Markets downgrade Starbucks Corporation (SBUX) from "outperform" to "sector perform," while reducing their estimates for the company. The target price has been reduced from $26 to $22.

In a research note published this morning, the analysts mention that company?s pricing power is under pressure on account of intensifying competition and weakness in US consumer spending. Since Starbucks has done little to boost traffic, which now depends on a recovery in consumer spending, which is unlikely in the near term, the analysts say. The company?s US store growth is quite high, adversely impacting returns, RBC Capital Markets adds. The EPS estimate for 2009 has been reduced from $1.23 to $1.22.