The Bull-Bear Debate On Starbucks Still Brewing

“Few can argue with the history of successes at Starbucks Corporation SBUX or its leadership position within the consumer landscape, but some may view the company as at a potential crossroad,” Deutsche Bank’s Brett Levy said in a note, while maintaining a Hold rating on the company, with a price target of $59.

The Bull-Bear Debate

Followed a recent Bull-Bear debate hosted by Deutsche Bank, the analyst expressed surprise that there were more investors were still leaning toward being bearish on the company or neutral than bullish at the meeting.

“The Starbucks story has been one of innovation, investments and execution, while growing its store base and global distribution capabilities,” Levy stated.

Over the last 12 months, various factors have impacted Starbucks’ performance, ranging from macro issues to the competitive landscape, as well as marketing, technology and operational challenges and changes.

While some of these factors have positive impacted the results, others have been disruptive in nature, leading to a drag on performance.

What Investors Want

Following Starbucks reporting lower than average same store sales and with the stock being range-bound over the past year, “investors are clearly undecided on what the next year may look like, thus helping to frame the Bull-Bear debate,” Levy went on to say.

The analyst believes that while the bulls were looking for the company to begin seeing accelerating same store sales, since that would help Starbucks achieve its EPS targets, while also potentially driving the stock valuation modestly up.

“Although Bears also recognize the near-term sales cadence and a year of easier compares, some view the sales slowdown as more broad-based, as their concerns include potential execution issues, increasing investment and what these factors mean for SBUX’s potential earnings algorithm and valuation,” Levy added.

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