The investor woes for Starbucks Corporation (NASDAQ: SBUX) are supposed to be cured. That’s what the market reaction was when news broke that the company’s board of directors had magically poached away CEO Brian Niccol from Chipotle Mexican Grill, Inc. (NYSE: CMG). The brief tenure of Laxman Narasimhan was not working and his exit was immediate. And everyone on the planet seemed to assume that leading Chipotle’s success has to be the best fit to get a Starbucks turnaround going strong.

What if that is not really the case? Brian Niccol has barely started his journey at Starbucks and Jefferies is so far one of the few larger firms on Wall Street not buying the story. Jefferies downgraded Starbucks to Underperform from an already-cautious Hold rating and the firm cut its target to $76 from $80 in the call.

Having an Underperform rating is the same as a “Sell” rating at some firms. The old $80 price target was already handily under the prior $95.48 closing price. The new $76 price target implies that there is downside of just over 20% if the Jefferies thesis plays out. Analyst targets are issued with a 12-month horizon, so that is the reason for this one rather negative call looking tactical after so many bullish reports were seen.

Tactical Bulls always reminds its readers and all investors that no single analyst report should ever be used as the sole reason to buy or sell a stock. The decision to buy, sell or hold (or short sell) needs to be made by each investor and should also be made with a financial advisor. And for the record, this Jefferies call is definitely against the grain of larger Wall Street reports.

WHAT JEFFERIES WORRIES ABOUT

Jefferies noted that the new CEO change “suggests necessary strategic change is now on the table.” That said, executing this change will be a challenging task. Changing the operations, culture, value, and even technology will all take time to fix — and the one-day jump of 24.5% would have led many investors to believe that throwing out one CEO and replacing him with top CEO pedigree would make for a rapid turnaround.

To put things clearly, Starbucks was at $77 right before the news, so this call is taking the stock all the way back down with almost zero CEO benefit at all. And the stock’s instant jump up to $95.90 (both before adjusting for the $0.57 dividend) has effectively done nothing since the August 12 date as the stock was at $95.48 before this analyst call.

Jefferies now believes that Starbucks will reset its fiscal-year 2025 guidance to low single-digit earnings growth. The current consensus estimates are pegging that at 11% to 12% growth, so that would be an obvious disappointment to investors who were so excited for such great CEO pedigree.

Jefferies also sees an ongoing negative same-store-sales trend taking the Starbucks earnings multiple lower, hence the call for roughly 20% downside.

WALL STREET GENERALLY DISAGREES

What is unique about this call is that it is one of the few major Wall Street firms to issue the “Sell” call this early in the game. Here are some of the upgrades seen in August after the CEO news of the year broke:

• Stifel raised to Buy from Hold and target to $110 from $80.
• Evercore ISI raised to Outperform from In-Line and target to $120 from $80.
• TD Cowen raised to Buy from Hold and target to $105 from $81.
• Deutsche Bank raised to Buy from Hold and target to $118 from $85.
• R.W. Baird to Outperform from Neutral with a $110 target.
• Piper Sandler to Overweight from Neutral and target to $103 from $85.

THE CEO’s PLAN

Niccol’s first message to employees, customers and investors admitted that, despite being a loved brand that is woven into customers’ lives, there is a shared sense that Starbucks has drifted from its core. That is an opportunity to make the store experience better for its employees and for its customers. Niccol’s main investments in technology are looking to improve the employees’ (partners) and customer experience, while also improving its supply chain and improving its app/mobile ordering.

IN THE END…

Most of Wall Street and Main Street alike seemed to be overly thrilled that Brian Niccol was replacing Laxman Narasimhan. After all, this is coming from leading the top growth story in the fast-casual dining sector of this generation and getting rid of a guy with a consumer products background. The reality is that Niccol is now there and he has laid out his first 100 days.

If he is able to keep the growth running while also making change inside the stores and supply chain, then maybe this “sell” equivalent call from Jefferies will be judged as too harsh. Then again, if this doesn’t get Starbucks back for investors, customers and employees, then many people will believe that the great growth story of Starbucks will just be yet another story of success turning into a mature normal company just fighting it out with a slew of public and private competitors that want more and more of its market share.