Earnings estimates continue to trend lower, which is bearish for the stock.
Starbucks shares will need additional upside catalysts to break the current downside trend.
Starbucks Stock Falls As The Company Suspends Its Stock Buyback Program
Shares of Starbucks found themselves under pressure after the company announced that it would suspend stock buybacks.
Howard Schultz is returning as CEO, and this is his first major decision. The company is under pressure due to the threat of unionisation of its workforce, so Starbucks wants to focus on the investments in its employees and stores.
Starbucks stock have been under pressure for many months. The stock made an attempt to settle above the $125 level back in July 2021 but lost momentum and declined towards the $80 level in mid-March. Currently, it is trying to settle below the $86 level.
What’s Next For Starbucks Stock?
Analysts expect that Starbucks will report earnings of $3.33 per share in the current year and $3.9 per share in the next year, so the stock is trading at 22 forward P/E. It should be noted that analyst estimates have been moving lower in recent months, which served as a material bearish catalyst for Starbucks stock.
At this point, it looks that the market believes that Starbucks’ costs will continue to grow in the near term. Meanwhile, the suspension of the buyback program removes some support that was previously provided to the stock.
In the longer term, the decision to suspend the buyback program may serve as a positive catalyst in case the money that would have been used to buy shares would be invested to re-energize growth. For Starbucks stock to have a chance to gain sustainable upside momentum, earnings estimates must start to move higher. In case earnings estimates continue to trend lower in the upcoming weeks, the stock could test recent lows near the $80 level.