Deutsche Bank analyst Brian Mullan boosted his rating of Starbucks to buy from hold while keeping his price target at $127, according to the Fly, citing a valuation for the upgrade following the stock's recent pullback.
The analyst has a "reasonable degree of confidence that one can start to 'leg in' here and ultimately be rewarded for taking the risk."
Separately, Bank of America analyst Sara Senatore reinstated coverage of Starbucks with a buy rating and a $135 price target, adding that that "growth in the specialty coffee segment continues to outpace that of overall foodservice globally and in the US."
And yet despite the attractive growth, the analyst said the few concepts have been able to achieve any meaningful scale.
The result is significant scale advantages and supra-competitive returns for those chains that have them, Senatore said, Starbucks included.
Given the size of Starbuck’s US system, she said she thinks "the impact of smaller concepts (even those with high growth) will be limited in the near term."
Starbucks shares were marked 1.2% higher in pre-market trading Monday to indicate an opening bell price of $112.53 each.
Last week, OTR Global downgraded Starbucks to Mixed from Positive after checks indicating that year-over-year growth in China slowed "dramatically" in fiscal Q4 because of new COVID-19 restrictions and increased competition from Chinese tea brands.
Starbucks posted better-than-expected third quarter earnings in July, while raising its fiscal-year profit guidance, as customers returned to stores in key markets as economies emerged from pandemic-triggered lockdowns.
The company reported earnings of $1.01 a share, firmly ahead of the consensus forecast of 77 cents a share and last year's third quarter loss of 46 cents a share.
Revenue rose 78% to $7.5 billion, again topping analysts' estimates of a $7.28 billion.
U.S. comparable sales surged 83% from last year as shops re-opened, while comps in China were up 19%. International comparable sales rose 41%, Starbucks said.
Looking into the final months of the year, Starbucks said it sees non-GAAP earnings in the region of $3.20 to $3.25 per share for fiscal 2021, with revenues rising to between $29.1 billion and $29.3 billion.
Starbucks is scheduled to report fourth-quarter earnings on October 28.