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Belus Capital Upgrades Starbucks Ahead of Q314 Earnings

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July 21, 2014 8:25 am
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In a note released Monday morning Belus Capital analyst, Brian Sozzi upgraded Starbucks Corporation (NASDAQ: SBUX) from Hold to Buy and currently has an $85 price target on the stock.

Sozzi admitted he has concerns as to what might happen in regard to coffee prices. However, he noted that he believes the company has had a solid quarter and suggested there might be some surprise on the average transaction value due to new food and drink introductions.

Sozzi appears quite optimistic about, Starbucks founder and CEO, Howard Schultz’s roll out of new global flagship stores. He is looking to the newly opened, 2,700 square foot store in Columbia to offer clues as to where Schultz sees the company’s future in retail.

Sozzi commented, “By turning these flagship stores into a Best Buy (NYSE: BBY) or Macy’s (NYSE: M) type shop in shops experience, customers will get a richer experience with the company’s brands. It will also help alleviate any operating pressures in the store related to high volume foot traffic.”

He also noted that Starbucks has been using mostly locally sourced material to construct these new flagship locations, which he says may be an attempt to emotionally connect with the locals.

Sozzi concluded the note saying, “Either way one looks at it, Starbucks is showcasing to investors that it has unappreciated future earnings power.”

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