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UPDATE: Evercore ISI Upgrades Starbucks (SBUX) to Outperform

May 4, 2022 5:22 AM EDT
Get Alerts SBUX Hot Sheet
Price: $85.62 --0%

Rating Summary:
    22 Buy, 22 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 6 | Down: 8 | New: 23
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(Updated - May 4, 2022 5:23 AM EDT)

Evercore ISI analyst David Palmer upgraded Starbucks (NASDAQ: SBUX) from In Line to Outperform with a price target of $95.00.

The analyst comments "Lower fear of the big FY23 reinvestment; Upgrading to Outperform. Following the earnings call discussion and follow up call with management, we are largely maintaining our FY23e and FY24e EPS that imply 23% CAGR EPS growth. Over the next two quarters, investors will need to look past ugly China results (SSS declines down 50%+ in April) and stepped up reinvestment (roughly $600m F2H22) in wages and training. However, by the September investor day and the Fall appointment of a new CEO, Starbucks will likely be able to share some stabilization in China trends, ongoing improvement in US SSS and a plan to improve throughput and capacity. From the earnings call and our discussions, we believe expensed investment will be relatively modest when compared to this year’s $1 billion and the nearly 300bp of inflation impact to US margins (roughly $700m-$800m). In our view, this reduces the odds of our $70 downside scenario (see page 2) and paves the way for a solid recovery path to $3.56 (+32% YoY; $3.85 cons.) and $4.09 (+15% YoY; $4.37 cons.) in FY23e and FY24e respectively. Given our outlook for a strong risk-reward, we are upgrading Starbucks to Outperform while maintaining our $95 price target. Our target is based on our DCF analysis and equates to 26x our 2023e EPS (5-year average NTM P/E of 23-29x)."

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 $74.33 yesterday.


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