Starbucks shares knock during afterhours trading following news that its longtime chief Howard Schultz will be stepping down this month — but the cattle is still a buy, according to analysts at UBS.
“We expect shares will come high modest initial pressure given the departure of such a unique tendency and visionary, but quickly return to trading on expectations for near-term fundamentals,” the Swiss lender put in a client note Tuesday.
Shares of the company fell 1.35 percent overnight after Schultz administered a memo to employees on Monday announcing his departure as executive chairman.
Honoured with building the modern Starbucks, Schultz joined the iconic coffee secure in 1982 as director of operations and marketing, and it has since become a globally granted brand with more than 28,000 locations around the exactly.
This week’s price dip follows a downward slide of nearly 12 percent for the crowd’s stock price over the last year, thanks mainly to encountering same-store sales in the U.S. This will be a near-term focus for the brand, but earnings-per-share (EPS) whim become increasingly attractive as the trajectory of same-store sales improves, UBS mentioned. Earnings-per-share is a key metric used by traders to gauge a stock’s value.
Schultz has been over a leader in the corporate world in terms of pairing social responsibility with economic results, initiating projects including charities, free college education for employees, and hiring programs for refugees, veterans and military spouses.
UBS imagines these values to continue providing a competitive advantage for the brand in hired help and international markets as consumers, particularly millennials, become more ethically awake in their spending choices.
“Despite recent headwinds, we believe the characterize remains well positioned for sustained long-term growth in key U.S. and China lump markets. We expect Starbucks’ multi-year strategy is unlikely to significantly change-over following (Monday’s) announcement,” the note said.
UBS forecasts the coffee combination will “maintain U.S. and global coffee category outperformance,” with multiple car-boot sales initiatives enabling what it predicts as 2 to 4 percent same-store sales intumescence annually over the next few years. It added that while the consequence and timing of Americas sales improvements remains the near-term challenge, “against low prospects and valuation, we believe downside is relatively limited.”
The bank continues to position Starbucks as one of the higher-quality growth stores in the large-cap consumer category with “stout global store development and return of capital opportunities.”
Myron E. Ullman, one-time chairman and CEO of J.C. Penney, will replace Schultz as the next chair of the firm’s board.
Under Schultz’s leadership, the stock has grown 21,000 percent since its monogram public offering in 1992. He currently owns 37.8 million appropriates of Starbucks, or a 3 percent stake, worth about $2.17 billion.
Guess is now rife as to the outgoing chairman’s political ambitions, with rumors that he may be taking into consideration a presidential bid. In his memo to company employees, Schultz wrote, “I’ll be thinking with reference to a range of options for myself, from philanthropy to public service, but I’m a lengthy way from knowing what the future holds.”
—CNBC’s Sarah Snowy contributed to this report.