Out Of Many, One: Starbucks Still A Standout In The Coffee Market

The competitive landscape within the retail coffee business is certainly set to intensify after JAB Holdings, the parent company of multiple coffee brands, acquired Panera Bread to build its retail presence across the U.S. Despite the competitive landscape, analysts at Deutsche Bank still see Starbucks Corporation SBUX as a notable standout in the space.

'Sales Can Cure Many Woes'

Bottom line, even when the analyst held a Hold rating on Starbucks' stock he still recognized the company's success in areas such as "innovation, investments and execution." Not much has changed in his view of the company but the rating upgrade suggests now is a compelling opportunity for investors to own shares. Related Links: Starbucks Meets Q2 Expectations, Valuation Still Too 'Venti' For Some Investors Survey Says: Starbucks Likely To Keep Making Gains In Market Share

Deutsche Bank's Brett Levy upgraded Starbucks' stock rating from Hold to Buy with a price target raised from $59 to $60, as the company has been "putting pieces in place to right its ship." Specifically, after a rough year which even included periods of turmoil, management has now shown same-store sales improvements in the U.S., refocused its operations and given the Street reason to now be optimistic.

Levy argued that if Starbucks' continues to show improved same-store sales growth trends after March and April's results then shares will follow suit and outperform. After all, "sales can cure many woes," and the company's investments in its businesses coupled with "structural and strategic moves" supports a bullish stance.

"Starbucks remains a standout operator and performer that should separate itself from its peers through ongoing menu innovation, its technology initiatives, and a focusing on the in-store experience, in our opinion."

The analyst did, however, caution there are some factors that could put his bullish stance in jeopardy. Specifically:

1. Same-store sales trends could remain below average levels.
2. Sales slumps could put pressure on 2017 earnings and the long-term investment profile.
3. The stock could re-rate to the lower.