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A Morning Wake Up Call on Starbucks (SBUX)

November 29, 2012 9:40 AM EST Send to a Friend
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Price: $70.15 --0%

Rating Summary:
    24 Buy, 4 Hold, 0 Sell

Rating Trend: = Flat

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The headline from Oppenheimer's most recent note on Starbucks Corporation (Nasdaq: SBUX) reads "Wake Up and Smell The Opportunity". Keep in mind it's early in pre-market trading, and I've yet take a sip of my own cup of java, but ok Oppenheimer, let's hear it.

Analyst Brian Bittner begins by stating outright that Starbucks is his top large-cap idea. He goes on to say that his model supports upside to management's F13 EPS outlook. However, he is particularly excited about FY14 when "coffee cost tailwinds accelerate and recent investments become accretive."

After 2-years of inflationary-driven pain in coffee costs, Bittner thinks Starbucks profits will benefit as prices deflate, resulting in a 9 cent EPS boost. He anticipates this trend will "flow-though" to F14 earnings.

On a higher level, Bitten thinks overall fundamentals are "robust" and could get even better in 2013 if "as we expect, K-Cups become more EPS-accretive and operating leverage improves across Starbucks' multi-channel US platform, China rapidly expands and EMEA potentially turns."

The bottom line is, and in Oppenheimer's view, Starbucks (Nasdaq: SBUX) is a Buy. It may take another cup of coffee or two before I can share Bitten's enthusiasm, but his point is made.

Starbucks . . . Coffee . . . Good . . . Buy .

Now, if I can just find my car keys.




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