Apple shares collapsed earlier this month after warning that iPhone sales would fall short because of weakness in the Chinese economy. Starbucks will be next, according to Goldman Sachs. The firm downgraded the world’s largest coffee seller to neutral from buy on Friday, citing “a number of points of caution on China.”
“The recent AAPL (Apple) announcement (while potentially also product-driven) cited trade concerns/macro, and MCD (McDonald’s) acknowledged softer trends in the region at a late November event,” wrote analyst Karen Holthouse in a note to clients. “The GS macro team also expects a continued slow down in GDP, at least partially driven by consumption.”
Goldman also lowered its price target on Starbucks to $68 from $75. The shares fell more than 2 percent in premarket trading Friday to $62.51 following the Goldman call.
Starbucks has 3,600 stores in China and wants to double that number in the next four years. Goldman noted the stock has doubled the return of the S&P 500 since the firm added Starbucks to its buy list in late 2014 so now is a good time to take some profits.
China will cut its GDP growth target for 2019 to 6 percent from 6.5 percent at a government meeting in March, policy sources told Reuters. The government is expected to take more monetary and fiscal measures to boost the economy this year amid weakening domestic demand and an ongoing trade battle with the U.S.
Trade talks between the two countries appear to be progressing well, but investors are striking a cautious tone until a formal agreement is announced by the March deadline.
Its unclear what the effect of the trade battle has had directly on U.S. brands selling in the country, but many Wall Street analysts believe Apple is facing an “informal boycott” of its products by some Chinese consumers.