The coffee chain's shares were rising marginally to $72.88 on Friday after Wells Fargo Securities analyst Bonnie Herzog threw her hat into the ring, upgrading the stock to "outperform" from "market perform."
Herzog said the stock has upside that's not being reflected currently, from its innovative food and beverage offerings to the company's digital retail capabilities. Following meetings with management, she came away feeling more positive on the company. She raised her price target range by $13 to a range of $87-$89.
"Overall, we have more conviction that SBUX's increased focus and discipline will propel the company into a new era of faster growth and innovation," Herzog writes in a note to clients. "Further, we continue to be impressed with: (1) SBUX's strong execution of multiple initiatives in the U.S., (2) its tremendous potential to become an international powerhouse, (3)its impressive loyalty programs and digital offerings, and (4) its long runway for growth in (consumer packaged goods) both in the U.S. and internationally where we believe it's just getting started."
Herzog especially pointed Starbucks' experimentation within the beverage area with its new "handcrafted cold carbonated beverages, which should be rolled out to one-third of its stores this summer," according to the note.
That could be huge, given Coca-Cola's (KO) decision to invest $1.25 billion, a 10% stake, in Green Mountain Coffee Roasters (GMCR), the maker of the popular single-serve Keurig machine, and collaborate on developing and rolling out the forthcoming Keurig Cold, an at-home cold beverage system, which will compete with SodaStream (SODA).