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Starbucks (SBUX) shares rise 2.31% on analyst upgrade
Starbucks (SBUX) shares were up 2.31% in Tuesday’s trading after Stifel upgraded the coffee chain to a ‘buy’ rating and hiked its price target on the prospect of a “more robust performance” and a potential sales spike in the US and China.
Starbucks has had a tough year thus far with its 10.5% slump in share price since 1st January almost directly attributed to challenges associated with COVID-19.
Revenue for the most recent quarter plummeted 38% and earnings per share slipped to -$0.46 as customer traffic disappeared almost overnight in regions around the world in the spring.
Interestingly, Starbucks said that its average ticket size per customer climbed 25% during this difficult period, highlighting how much store closures had hit its bottom line.
Things could be looking up now though as stores begin to reopen.
Stifel analysts believe that the worst is over and forecast strong same-restaurant sales growth for the coming months despite ongoing headwinds.
The investment banking company saw fit to upgrade SBUX to ‘buy’ early on Tuesday and add $12 to a new $90 price target.
“Our upgrade reflects our view the company is taking quick, aggressive steps to navigate these headwinds,” analyst Chris O’Cull said.
Those steps include a quicker rollout of loyalty programme changes and the arrival of new store formats, which are expected to support sales recovery in the US and China.
In addition to the after-effects of the pandemic, Starbucks is also facing up to a drop off in demand related to travel and breakfast.
O’Cull believes that the Seattle-based company is in a good place though and has been able to make changes quickly, a feat that he believes has been rare in the restaurant industry.
Starbucks shares were valued at $80.58 at 10:30am EST on the Nasdaq on Tuesday.
Morningstar analyst R.J. Hottovy believes that SBUX will continue to offer value to investors at up to $90 per share.
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