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The Sell-Side Sentiment On Starbucks

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The Sell-Side Sentiment On Starbucks
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Deutsche Bank's Brett Levy maintained a Buy rating for Starbucks Corporation (NASDAQ: SBUX) and he decreased his price target for the stock from $67 to $62, after the company reported earnings Thursday. Levy said he expects new stores to contribute to top line growth, while integration of East China operations could bring structural improvements. He's also enthusiastic about capital returns, as the company plans to return $15 billion to shareholders. The new price target reflects 15 times EV/EBITDA.

Morgan Stanley: Investors Slowly Returning To Starbucks 

Morgan Stanley's John Glass said Starbucks offered credible 2018 guidance and he expects investors to slowly start buying the stock again. Morgan Stanley reiterated an Overweight rating for the stock and has a price target of $62. Starbucks has the potential for improvement in cost control and labor management, Glass said, and he expects that buybacks are going to help EPS, which should also improve with the completion of the company's China joint venture.

Compelling Risk-Reward

Sharon Zackfia of William Blair has Outperform rating for Starbucks. Fourth-quarter results were in line with expectations, while revised guidance creates more potential for the company to meet or beat expectations going forward, Zackfia said. The stock's risk-reward is compelling, and the valuationn can be maintained, with investors benefiting from annual EPS growth in the low-to-mid-teens, the analyst said. 

Jefferies: Starbucks Remains Attractive

Jefferies' Andy Barish maintained his Buy rating and a price target of $65 for Starbucks. The stock remains attractive at roughly 23 times 2018 price-to-earnings and with a slight discount to other mid-to-large-cap restaurants. The execution of same-store sales drivers and margins is the main risk for the company, Barish said. Margins can continue to move higher and help drive consistent EPS growth annually, the analyst said. 

Guidance Is Crucial 

Dennis Geiger of UBS reduced his price target from $67 to $64 and reiterated a Buy on Starbucks. Some upside potential exists for the company after it lowered its guidance, Geiger said. It's crucial for Starbucks to achieve new guidance, and the company is well-positioned to do so with strong sales drivers and an increased focus on cost savings and margin management, the analyst said. UBS' price target is based on 14 times the estimated 12-month EBITDA.

Same-Store Sales Miss Nomura Estimate 

Nomura's Mark Kalinowski maintained a Buy rating and lowered his price target for Starbucks from $67 to $63. Starbucks reached his Q4 EPS estimate, but failed to meet Kalinowksi's same-stores-sales expectations, as the company eported 2 percent growth in same-store sales against the analyst's 3 percent projection. Nomura's price target is based on 27 times price to earnings multiple, lowered from 29 times P/E. The firm's 2018 EPS estimate is unchanged at $2.32.

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Latest Ratings for SBUX

DateFirmActionFromTo
Oct 2018Wells FargoMaintainsOutperformOutperform
Oct 2018Bank of AmericaMaintainsBuyBuy
Oct 2018KeyBancInitiates Coverage OnOverweight

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