Belus Capital Advisors CEO & Chief Equities Strategist Brian Sozzi downgraded Starbucks Corporation (NASDAQ:SBUX) to Hold from Buy on Jan 14; as today’s earnings results seemingly confirm his thinking.

starbucks

On January 14, 2014 we downgraded our rating on Starbucks Corporation (NASDAQ:SBUX) to Hold from Buy. We believe, a least initially, the earnings results confirm the reasons for that downgrade. They include:

Starbucks stock valuation

1. One must show respect to comments by a founder not just collecting checks, rather he is very much still in the trenches daily. So when he notes fundamental shifts in how good are consumed that has to be appreciated, and it wasn’t reflected in the stock’s valuation. Looking through the report, that “seismic” shift (which amounts to another attempt to reset Street expectations) noted by the company this evening appears in another quarter of slowing Americas transactions sequentially.

Starbucks’ value lies in food and beverages

2. As our investigative video work on Starbucks Corporation (NASDAQ:SBUX) showed, long lines may be reducing the propensity to consume drinks that take longer to concoct and wait around for food items to be heated. That thought appears in the missing acceleration in Americas (actually global) transaction value. Bottom line: Starbucks is valued as a company that is now selling food AND beverages morning, noon, and in the evening.

The stock is acting very volatile afterhours (down then up). We liked the global op margin expansion, but need some clarity on U.S. demand trends on the earnings call before considering a return to a buy rating.

Why are we including this in a flash report on the company’s earnings? Well, we wanted to show the increased complexity behind the Starbucks counter (function of the expanding menu) that is slowing lines and leading to modest disappointment in what people are ordering (tea comes out quicker than specialty coffees; do you want to wait even longer for a food item to be heated).