Starbucks Stock Cools Off After Ratings Cut

As if Nasdaq’s tech components weren’t stirring up enough trouble Monday, the composite was cooled off further by specialty coffee retailer Starbucks Corp. (ticker symbol: SBUX), which slid 8% after two analysts cut their ratings on the stock.

Starbucks fell $3.38 to close at $41.44. Before Monday, the stock had risen 85% this year.

“The valuation got ahead of the fundamentals,” said Mitchell Speiser, a Lehman Bros. analyst who cut the stock to “outperform” from “buy.”

Starbucks shares have risen on investor confidence in the popularity of coffee drinks and the company’s expanded sales into supermarkets and on the Internet. The Seattle-based company has more than 2,500 locations in North America, Britain, Asia and the Middle East.

“Their coffee business, along with other opportunities like their Internet relationships, have created a lot of interest and investment in the stock,” Speiser said. Starbucks, which trades at about 59 times estimated earnings for 2000, exceeded his year-end price-to-earnings ratio target of 50, he said.

Merrill Lynch Global Securities analyst Scott Waltmann, meanwhile, cut his near-term rating to “accumulate” from near-term “buy.”