11:57 AM EDT, 07/12/2024 (MT Newswires) -- Starbucks ( SBUX ) is expected to report a 10% decline in fiscal Q3 comparable store sales in China from a year earlier amid increasing competition, Morgan Stanley said Friday in a report.

The investment firm revised its forecast for China same-store sales from a 5% decline in the company's second-largest market behind the US. In fiscal Q2, same-store sales fell 11% in the Asian nation.

Morgan Stanley said it is still projecting a 2% decline in Q3 same-store sales in the US, in line with market estimates, as traffic trends may have improved sequentially.

"Data we follow seems to support a modest tick higher for US comps, though we make slight downward adjustments here for China and FX, but remain within guidance, and similar to consensus on top line," the report said.

The reported Starbucks ( SBUX ) boycotts in the Middle East related to Israel's war against Hamas are "an emerging risk," Morgan Stanley said

The firm trimmed its forecast for fiscal Q3 earnings to $0.91 a share from $0.92, below the Street estimate of $0.94, on the China and Middle East outlook. The fiscal 2025 EPS estimate was cut to $3.98 from $4.14.

Morgan Stanley lowered its price target for Starbucks ( SBUX ) to $98 from $104, while maintaining its overweight rating on the stock.

Results from Q3 are expected in late July to early August.

Starbucks ( SBUX ) shares rose 1.3% in recent trading Friday.

Price: 74.24, Change: +0.94, Percent Change: +1.28