$Starbucks(SBUX)$ share price plunged after the company announced plans to suspend its share buyback programme. With investor sentiment damaged, securing future growth and keeping employees on the company’s side could be crucial. Analysts are already downgrading the stock.
One of newly appointed chief executive officer, Howard Schultz’s first moves was to suspend the Starbucks [SBUX] share buyback programme indefinitely. Only a month ago the company announced that Kevin Johnson would be retiring as CEO to be replaced Schultz returning to the position for a third term.
In a message to shareholders and customers, Schultz said: “This decision will allow us to invest more into our people and our stores — the only way to create long-term value for all stakeholders.”
While the Starbucks share price rose 5% in intra-day trading on 16 March following the announcement of Schultz’s return, the stock has been trading lower since the share buyback news broke at the start of the trading week commencing 4 April. Having closed on 1 April at $91.49, the Starbucks share price was down 12.8% to $79.79 at the close on 12 April. The stock has given back all of the gains it had made in the previous month.
Nevertheless, analysts are divided over Schultz’s decision to suspend the buyback programme. Wedbush analyst Nick Setyan has downgraded his rating from ‘outperform’ to ‘neutral’ and slashed his target for the Starbucks share price from $105 to $91. Setyan believes the suspension of repurchases could go hand in hand with a failure to deliver on its guidance of low double digital EPS growth from fiscal 2023 onwards.
BMO Capital analyst Andrew Strelzik also lowered his price target from $125 to $115 but reiterated an ‘outperform’ rating. Strelzik however, doesn’t think the suspension is an indicator of underlying problems at the company. Instead, it should be seen as Schultz reprioritising resources.
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