Starbucks (SBUX) - Get Report shares rose on Tuesday after Stifel analyst Christopher O’Cull lifted his rating on the coffee-shop chain to buy from hold and increased his share-price target to $90 from $78.
He’s enthusiastic about Starbucks’ sales trends.
Starbucks shares recently traded at $80.52, up 2.3%. The stock had fallen 11% year to date through Monday, compared with a 6% increase for the S&P 500 index during that period.
Same-restaurant sales are recovering “at least in line” with Wall Street estimates, O’Cull wrote in a commentary cited by Bloomberg.
He says the Seattle company faces obstacles such as travel declines and slumping breakfast declines. But "our upgrade reflects our view the company is taking quick, aggressive steps to navigate these headwinds," O’Cull said.
He’s optimistic about Starbucks’s focus on curbside pickup, its decision to accelerate changes in its loyalty program, the implementation of new store formats and other initiatives, MarketWatch reports.
"We believe these actions will lead to steady sales recovery in the U.S. and China," O’Cull said. All this could create “more robust performance as consumer mobility increases,” he said.
O’Cull is impressed with the company’s nimble reaction to the coronavirus pandemic. "Despite its size, Starbucks has been able to accomplish this feat better than almost anyone in the restaurant industry," he said, according to MarketWatch.
Meanwhile, the company said it would start selling Pumpkin Spice Lattes throughout the U.S. and Canada Tuesday, making this the earliest release date for the beverage.
Morningstar analyst R.J. Hottovy puts fair value for Starbucks at $90 a share.
“[I]nvestors should prioritize those firms that have the scale to be more aggressive on pricing near term (value-oriented players tend to outperform during economic shocks); give their customers greater access through robust digital ordering, delivery, and drive-thru capabilities; and have healthy balance sheets (both at the corporate and licensed partner level)," he wrote in a commentary earlier this month.
"In our view, Starbucks meets the access and balance sheet investment criteria, and while the company's recovery may lag other industry players due to reduced morning commute traffic, we believe it is positioned to take market share in a specialty coffee category that will likely be hit harder than many other restaurant subcategories."