A 2% jump in Tuesday’s session had shares of coffee giant Starbucks (NASDAQ:SBUX) up to fresh all-time highs. It’s been a solid first quarter for the Seattle headquartered company and comes on the back of a stellar 2020.
The stock was trading near highs right as the pandemic hit the markets around this time last year, but quickly gained a reputation on Wall Street as one that would recover quicker than most. With all of that damage undone and shares above their previous highs, it’s safe to say it was a reputation well deserved. Even with the ongoing rally, however, it looks like there’s still room ahead for Starbucks to run.
Run Of Upgrades
BTIG upped their rating on the stock from Neutral to a Buy yesterday, and see Starbucks continuing to benefit from the ongoing economic recovery and reopening. In a note to clients, analyst Peter Saleh said:
"in the near-term, we expect 2QF21 EPS to top consensus expectations as the company laps the initial impact from the pandemic in China (February) and U.S. (March) and we view guidance as overly conservative. For the balance of the year, we expect same-store sales to materially accelerate due to easier comparisons, reopenings and federal stimulus. The combination of unfolding economic recovery, earnings upside and broad geographic profile leads us to become more positive on shares and upgrade accordingly."
On top of this uber bullish sentiment, a fresh price target of $130 from Saleh suggests upside of close to 20% even from Tuesday’s closing high. The move from BTIG mirrors that of their peers in BMO Capital who also upgraded the stock late last month. They too named Starbucks as “a reopening beneficiary with meaningful potential upside to FY21/FY22 consensus.”
Wells Fargo) has been another sell-side voice that’s been impressed with them and recently flagged Starbucks as one of the top consumer stocks to own for 2021. In a powerful statement from the last week of February, they noted how they “had never seen consumers emerge from a recession as strong as they are right now.”
Gordon Haskett and Cowen have also both recently highlighted Starbucks as a must-own stock for the post-COVID recovery. Analyst Jeff Farmer from the former pointed to "the company's increasingly aggressive pursuit of competitive advantages across digital, delivery, convenience, customer loyalty and labor force stability” as factors that will set it up well for future growth. Cowen loves how digital Starbucks has become, and is backing consumer companies with a high level of digitalization to outperform the broader market in the coming months.
All this will be music to the bull's ears and should tempt even the more cautious investor to consider getting involved. Shares were trading at highs before the pandemic, and look set to be trading at highs after the pandemic too. There’s a nice ring to that kind of a label and you’d be hard-pressed to find many other brick and mortar-based stores that can boast the same.
Just last week we saw both New York and New Jersey were planning to increase indoor dining restrictions to 50% of capacity, so there can be no doubt that the economic reopening is well and truly underway. Starbucks has positioned itself as a consumer staple that can pivot when needs be, and should be a good value for money to continue setting highs into the second quarter of the year.
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