While shares of Starbucks Corp. SBUX fell almost 2% in Tuesday’s extended trading session amid worries about the company’s international growth, Cowen Equity Research said the world’s largest coffee chain continues to be its favorite U.S. “reopening” stock.
The Starbucks Analyst: Cowen analyst Andrew Charles maintained an Outperform rating on Starbucks stock and raised the price target to $126 from $120.
The Starbucks Thesis: The Cowen analyst sees room for Starbucks’ multiple expansion based on confidence in the U.S. economic recovery that should overshadow a potentially bumpier international recovery. He noted that Starbucks recorded second-quarter U.S. and Americas same-store sales growth of 9%, compared to the brokerage’s estimate for 8% growth.
According to the analyst, Starbucks’ addition of over 3.5 million members to the My Starbucks Rewards (MSR) loyalty program should manifest an upside to U.S. same-store sales for the foreseeable future. The analyst said the company’s U.S. strength should overshadow its international sales shortfall.
Starbucks International Growth Worries: Nevertheless, worries about a slower recovery in some international markets amid the uneven global economic recovery weighed on Starbucks’ shares on Tuesday.
The Seattle-based coffee chain reported mixed results for the second quarter on Tuesday, with earnings topping analysts’ expectations and revenue missing estimates. In addition, the company raised its full-year forecast for earnings and revenue.
Starbucks' international sales growth of 35% trailed Cowen’s estimate for 46% growth, as a rebound in China was overshadowed by weakness in some international markets due to the pandemic. However, the growth in China also trailed analysts’ estimates due to increased government restrictions on mobility in response to a spike in coronavirus infections in the middle of the quarter.
Price Action: Starbucks shares closed 0.2% higher in Tuesday’s regular trading session at $116.15, but declined 1.7% in the after-hours session to $114.16.
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