Starbucks (SBUX) PT Raised to $136 at Tigress Financial Partners

December 28, 2021 11:47 AM EST
Get Alerts SBUX Hot Sheet
Price: $84.26 -2.67%

Rating Summary:
    22 Buy, 22 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 10 | Down: 4 | New: 31
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Tigress Financial Partners analyst Ivan Feinseth raised the price target on Starbucks (NASDAQ: SBUX) to $136.00 while maintaining a Buy rating, saying it remains well-positioned to benefit from the post-pandemic reacceleration in economic growth, and new labor investment initiatives will drive long-term shareholder value creation.

The analyst commented, "SBUX continues to benefit from increased consumer mobility and spending that will continue to accelerate in a post-pandemic economy. SBUX’s recent commitment of an over $1 billion investment in hiring and wage increases in 2022 will pay off in the long term, along with ongoing investments in digital services and technology. Shares continue to perform well, recovering from a recent post-earnings announcement selloff and concerns that its new investment in labor and technology investment initiatives could weigh on margins and profits. SBUX Q4 revenue increased 31% Y/Y to a record $8.1 billion driven by a 17% Y/Y increase in global comp-store sales and a 15% Y/Y increase in comp-store transactions as SBUX continues to benefit from its strong brand equity, loyal customer base, and increasing in-store traffic helped by a global economic reopening. U.S. comp-store sales increased 22% Y/Y, driven by a 19% Y/Y increase in comp transactions and a 3% increase in average check. Stars for Everyone (SFE), SBX rewards program, saw its membership increase 28% Y/Y, reaching close to 25 million members. SBUX announced a significant wage increase commitment targeting an average hourly wage in the U.S. of $17 by 2022 with ranges of $15-$23 per hour for baristas enabling it to hire staff, especially as competitors will continue to struggle with staffing as they do not have SBUX’s strong brand equity and pricing power to compete. SBUX will continue to enhance business processes and customer experience, including utilizing machine learning and predictive intelligence to optimize its supply chain and real-time inventory management. SBUX is also committed to returning over $20 billion of cash to shareholders through dividend increases and share repurchases over the next three years and recently announced a 9% increase to its quarterly dividend from $0.45 per share to $0.49 per share. SBUX’s successful operating history and incredible brand equity combined with its new expansion and digital initiatives will drive significant increases in Return on Capital (ROC), increase Economic Profit, and create greater shareholder value. SBUX enhances shareholder returns through ongoing dividend increases and has a history of share repurchases. We believe further upside exists and our 12-month target price of $136 represents a potential gain of over 19% from current levels."

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