Deutsche Bank just downgraded Starbucks because of its new loyalty program

Deutsche Bank says the changes Starbucks has made to its rewards program could drive customers away.

In a note on Tuesday, research analyst Brett Levy said the changes, and investors' high expectations for the company's performance, were among the reasons for his downgrade on Starbucks shares.

Levy lowered his rating on Starbucks to "hold" from "buy", and dropped his price target on the stock by 8.6% to $64 from $70 per share.

Starbucks shares fell 3% to $58.88 in early trading on Tuesday.

The company announced changes to its loyalty rewards program in February. Instead of rewarding customers for just about every purchase, earnings points will now be based on how much is actually spent.

Levy is concerned that this change, which kicks in on Tuesday, could drive Starbucks coffee drinkers to its competitors. He said Dunkin' Donuts is already taking the opportunity to launch a promotion for its loyalty program.

Levy wrote:

We are lowering our rating on Starbucks shares to reflect more muted sales/earnings upside (given challenging comparisons and some operational changes) and our reduced expectations for meaningful near-term share price appreciation.

The combination of the changes to its domestic loyalty program (which could create some near-term disruption), the addition of Japan into the CAP [College Achievement Plan] segment's comp base (this more mature business is expected to grow more in a +LSD rate than the recent +MSD-HSD rate across all of CAP) and even the potential of ancillary or macro/geopolitical factors (for example on the company's F1Q16 call, management indicated the 11/15/15 Paris incident was a disrupting factor during the quarter), could all weigh on SSS and the stock.

Levy noted that Starbucks' US same-store sales - at locations open for at least one year - rose a solid 9% in the fourth quarter. But with same-store sales driving much of the stock's rise, he said, there's a risk that both metrics decline with as the loyalty program changes.

He said it's possible that loyal Starbucks drinkers spend more there to earn more points, but it could take a while for this extra spending to show up in the sales numbers.

Starbucks shares have rallied 22% in the past 12 months.