Starbucks Upgraded to Outperform on Sales Expectations

Starbucks  (SBUX) – Get Report shares rose Wednesday after Cowen analyst Andrew Charles upgraded the coffee-bar chain’s stock to outperform from market perform and raised his share-price target 29% to $99 from $77.

“We view early signs of the U.S. recovery as durable, aided by broadening digital access through expanded pay options for loyalty and 23% of U.S. stores adding curbside pickup,” he wrote in a commentary.

“Covid-19 presents new efficiency opportunities [to drive] 15% earnings-per-share growth for 2022-2023, he said. The shares risk/reward balance is “compelling, as our bull/bear cases suggest 2-to-1 upside/downside ratio.”

The Seattle chain’s stock recently traded at $86.72, up 2.3%. The shares have eased 1% this year. The new price target indicates 17% upside from Tuesday’s close at $84.80.

“We view Americas same-store sales as the key metric for SBUX, given a 0.8 correlation with SBUX’s forward price-to-earnings multiple pre-covid-19,” Charles said.

“We believe Starbucks is pursuing the right structural drivers to help transcend displaced morning routines, including broadening payment options beyond a Starbucks card for customers to join My Starbucks Rewards loyalty program.”

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