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Starbucks Eases After Revenue Lags, but Analysts Stay Bullish

Starbucks eases after the chain misses Wall Street's revenue outlook, but analysts remain bullish on the coffee-bar chain's prospects.
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Starbucks  (SBUX) - Get Starbucks Corporation Report shares fell Wednesday after the coffee-shop titan posted lower-than-expected revenue, but adjusted profit beat expectations, and analysts remain bullish.

The Seattle chain earned an adjusted 62 cents a share in the quarter, topping the FactSet analyst consensus of 53 cents. 

Revenue rose 11% to $6.67 billion, lagging the analyst consensus of $6.78 billion.

The stock recently traded at $113.43, down 2.3%. It has gained 29% in the past six months amid strong consumer demand.

Wedbush analyst Nick Setyan rates Starbucks outperform and lifted his share-price target to $132 from $124. U.S. sales-growth momentum should continue, he said, according to Bloomberg.

Setyan also anticipates increased adoption of mobile ordering/payment and Starbuck’s loyalty program, menu innovation, and successful drive-through initiatives.

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Wells Fargo’s Jon Tower rates Starbucks overweight, boosting his price target to $129 from $126.

The stock’s appreciation may pause for a little while, as investors process the “noisy” second-quarter results, he said, according to Bloomberg. 

But Tower expects a “lingering” attachment to food and premium beverages, after “COVID trial/habit-formation.”

Morgan Stanley’s John Glass has an equal-weight rating based on valuation and high expectations. But he views many of Starbucks’s positive margin inputs as “sustainable.”

Last month, BTIG analyst Peter Saleh upgraded Starbucks to buy from neutral, maintaining his $130 price target.

"A faster-than-anticipated pace of restaurant reopenings," coupled with the recently approved federal stimulus, will bring customers back to coffee shops, he said.

"For the balance of the year, we expect same-store sales to materially accelerate due to easier comparisons, reopenings and federal stimulus."