Starbucks Stock Drops 3.2% as Earnings Miss Estimates

Starbucks (SBUX) stock surprised its investors with preliminary Q4 results and caused a decrease in share prices by over 5% in premarket trading on Wednesday. The coffee colossus announced a 3% year-over-year decrease in revenues to $9.1 billion, and thereby adjusted earnings per share dropped 24% to $0.80.

The weakness was apparent in key markets. For instance, US same-store sales dropped by 6% because of a huge 10% decline in foot traffic despite a 4% growth in the average receipt size. The advertising measures, like the “$5 coffee-and-croissant pair menu,” were not effective in attracting consumer interest. Moreover, Starbucks China experienced a sharp 14% fall in same-store sales. This decline came from drops in both foot traffic and average ticket size. These decreases resulted from two main factors. First, the company faced more challenging competition. Second, China’s macroeconomic environment has weakened.

The corporation also shattered analysts’ expectations when it cancelled fiscal 2025 year-end guidance, which was due to the CEO transition to Brian Niccol. Niccol, who managed to reinvent Chipotle, is the one who has taken over Starbucks. Investors pushed the shares to a 10% growth over the last six months, showing a high level of confidence in his leadership. The quarterly reports, however, show the impossibility of a rapid recovery.

Starbucks will release its official Q4 and full-year 2024 results on October 30. Analysts will focus on several factors. However, they are particularly interested in Mr. Niccol’s plans for brand revitalisation.

Starbucks Stock Chart Analysis

SBUX/USD 15-Minute Chart

By observing the 15-minute chart for Starbucks (SBUX), it is obvious that the stock had been very volatile for several days.

The stock has maintained stable trades between $95 and $97, with a high of $97.20 on this day. Thus, we can conclude that this period is a slight upward trend. Nevertheless, this morning, we saw an instant bearish reaction that led to a drop to $93.69 in the price intraday before it recovered quickly.

The drastic decrease likely stems from the negative reaction to Starbucks’ first preliminary Q4 results. These results failed to meet market expectations. Investors appear concerned about two key issues. First, the 24% cut in adjusted earnings per share alarmed the market. Second, the company’s decision not to provide its full-year 2025 guidance has created uncertainty. This guidance gap comes as Starbucks transitions to its new CEO, Brian Niccol.

In early trading, the stock dropped drastically, which is also related to the premarket plunge of up to 5%. Although there was a sharp initial decline, the stock is now recovering to approximately $96, notwithstanding its difficulty in breaking through the $97 level it had at the beginning of the week.

If you’re confident in the company’s long-term outlook, consider buying on the dip, but if concerns remain, waiting for clearer guidance could be the smarter move.