How Starbucks Coffee (SBUX) Plans to Return to 5% Growth - RBC
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RBC Capital analyst, David Palmer, reiterated his Outperform rating on shares of Starbucks (NASDAQ: SBUX) after hosting meetings with Starbucks management. Conversations fell into three buckets: 1) reasons for a rare quarter of sub-5% Americas SSS growth, and confidence in a return to 5%; 2) FY17 margin/EPS considerations; and 3) long-term growth drivers.
The company cited three factors that contributed to its 4% Americas SSS in F3Q: 1) a slowdown in the My Starbucks Rewards (MSR) adoption rate and mobile usage growth as consumers acclimated to the new app; 2) increased consumer uncertainty; and 3) a mis-execution of the Frappuccino happy hour. Of these issues, the company noted that macro uncertainty is the only factor beyond its control. The analyst believes negative effects from the new Rewards app will continue to fade while other digital marketing can bolster sales. In short, the company sounded confident that with improved execution it would hit its 5% target for F4Q.
No change to the price target of $68.00
Shares of Starbucks closed at $55.42 yesterday.
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