Starbucks Corporation SBUX remains one of the more "disrupted" restaurants but management deserves credit for implementing quick and aggressive steps to better position itself, according to Stifel.
The Starbucks Analyst: Chris O'Cull upgraded Starbucks from Hold to Buy with a price target lifted from $78 to $90.
The Starbucks Thesis: Starbucks is feeling pain from breakfast disruption, deserted urban areas, and decimated travel/tourism, among other COVID-19 related headwinds, O'Cull said.
But some of the steps the company has already implemented to ease its problems include addressing throughput issues through drive-thru improvements and new store layouts, as well as improving and expanding digital order and payment options.
"In our view, investors should look for companies willing and able to innovate quickly to address the challenges of the current environment," the analyst wrote in the note. "Despite its size, Starbucks has been able to accomplish this feat better than almost anyone in the restaurant industry."
Mobile Data Update: Starbucks' management said during its late July earnings conference call that U.S. comps were down 14% throughout July, marking an improvement from down 19% in June. But based on mobile location data obtained by Stifel, August trends continued to improve.
In fact, fourth-quarter same-restaurant sales are likely tracking ahead of the Street's estimate for down 13% for the full quarter.
The fourth quarter could also see a lift from "destination drinks" associated with holidays from a restaurant that earned a reputation of offering a low-risk and convenient experience, the analyst said.
SBUX Price Action: Shares of Starbucks were trading higher by 2.9% at $80.99.
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