Starbucks (SBUX) an Ultimate $100B Market Cap Stock, Piper Jaffray Says; PT Raised to $100

November 28, 2014 7:04 AM EST
Get Alerts SBUX Hot Sheet
Price: $118.34 +1.44%

Rating Summary:
    27 Buy, 18 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 17 | Down: 13 | New: 41
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Piper Jaffray analyst Nicole Miller Regan reiterated an Overweight rating and boosted her price target on Starbucks (NASDAQ: SBUX) to $100.00 (from $90.00). After looking at both the bull and bear thesis, the analyst said the 'horns" win it and she sees the stock as an ultimate $100 billion market cap opportunity.

"Starbucks remains an elite global consumer brand with highly attractive core business fundamentals that allow for substantial future growth opportunities across its portfolio," Regan said. "From a stock perspective, SBUX shares are favorably positioned within our “Next Layer” theme work whereby we identify the perfect “recipe” for a restaurant stock as one that combines Brand Equity + Asset-Light Growth + High Margin Licensed Sales. Further, the company’s strong cash flow generation support continued reinvestment into the business and an ongoing commitment to capital allocation."

Bull Thesis

1. Four Years to $100 Billion Market Cap:

  • Americas: +MSD% Comp Momentum
  • EMEA: Improving Margins
  • CAP: Accelerating Development
  • CPG: Market Share Gains/Margin Leverage

2. Leverage Core Product & Brand Appeal:

  • Productivity Growth: Technology, Processes
  • Platform Growth: Beverage, Food
  • Daypart Growth: Non - Peak Morning

3. Barriers to Entry:

  • Human Capital Investments
  • Investments Around Loyalty and Payment Technology

4. Attractive Valuation:

  • Core Retail Segment: 15x EV/EBITDA
  • Channel Development Segment 19x EV/EBITD

Bear Thesis

1. Recent Stock Underperformance:

  • Suggests Downside Potential Should Positive Trends Reverse as Stock is Not Getting Credit for Current Performance
  • Perennially Underutilized Balance Sheet

2. Maturation of Core Market:

  • Domestic Market Needs to Slow Growth, Risk of Cannibalization, Store Closures and/or Comp Slowdown

3. Persistent COGS Headwinds:

  • Coffee
  • Dairy

4. Unattractive Valuation:

  • P/E Based

For an analyst ratings summary and ratings history on Starbucks click here. For more ratings news on Starbucks click here.

Shares of Starbucks closed at $79.70 yesterday.

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Piper Jaffray, Nicole Miller Regan