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Starbucks' Price Target Cut To $64 At BTIG, But Firm Still Confident

While Starbucks Corporation SBUX reported disappointing comps, a reacceleration can be expected going ahead, BTIG’s Peter Saleh said in a report. He maintained a Buy rating on the company, while reducing the price target from $75 to $64.

Starbucks reported its 3QF16 adjusted EPS at $0.49, marginally ahead of the BTIG estimate of $0.48.

Comps Disappoint

The company’s global comps grew 4 percent, significantly below the BTIG estimate of 5.2 percent and the consensus expectation of 5.7 percent. The shortfall was on account of softer results across all regions. Management indicates that the weaker results were on account of political and economic uncertainty as well as marketing execution.

Americas same-store sales came in at 4 percent. This was “driven entirely by check growth with transactions flat as the transition of My Starbucks Rewards early in the quarter competed with the spring Frappuccino promotion,” analyst Peter Saleh noted.

Comps To Reaccelerate

Saleh expressed confidence in Starbucks being able to “reignite growth with the help of menu innovation and digital enhancements.” He projected an improvement in Americas comps in 4QF16 to 5.0 percent.

While some investor may be discontent with the given recent results, following very impressive comp trends, the setback is likely to be “temporary and not reflective of any brand or long-term issues,” the analyst commented.

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DateFirmActionFromTo
Jul 2016Goldman SachsMaintainsBuy
Jul 2016WedbushMaintainsOutperform
Jul 2016BTIG ResearchMaintainsBuy

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