On Wednesday, Deutsche Bank expressed increased confidence in Starbucks Corp (NASDAQ:SBUX) by upgrading the stock from Hold to Buy and raising the price target to $118 from the previous $85. The upgrade follows the announcement that Brian Niccol will take over as the new CEO of the coffee giant.
The analyst from Deutsche Bank cited the appointment of Brian Niccol as a pivotal factor in the decision to upgrade the rating. According to the analyst, Niccol's track record of success in the restaurant industry, particularly with the turnaround at Chipotle Mexican Grill (NYSE:CMG), positions him as a "home run hire" for Starbucks.
The analyst believes Niccol's experience in operations, marketing, innovation, and technology, along with his tenure at youth-oriented and culture-forward brands such as Chipotle and Taco Bell, will be invaluable as Starbucks aims to broaden its appeal and enhance its operational efficiency.
Starbucks had previously been downgraded following its second fiscal quarter due to near-term risks and concerns that the company's strategy was not adequately addressing underlying issues.
However, the analyst now suggests that these fundamentals may be temporarily overshadowed by the market's optimism towards Niccol's potential to develop a long-term growth strategy and drive value creation.
The analyst further noted that Starbucks is considered one of the highest quality global restaurant companies. With Niccol at the helm, the firm believes that the risk/reward profile for Starbucks is now tilted favorably towards the upside. The market's response to the leadership change and the revised price target will be closely watched by investors and industry observers alike.
In other recent news, Starbucks Corporation (NASDAQ:SBUX) has seen significant developments, with the company's shares receiving upgrades from multiple financial firms following the appointment of Brian Niccol as the new CEO.
Evercore ISI upgraded Starbucks from "In Line" to "Outperform" and raised the price target to $120, anticipating a positive impact on the company's U.S. operations under Niccol's leadership.
Similarly, Stifel upgraded the company's stock from Hold to Buy, setting a new price target of $110, while TD Cowen also upgraded Starbucks shares from Hold to Buy, adjusting their price target to $105.
BMO Capital maintained its "Outperform" rating for Starbucks, viewing the leadership change as a positive step, and Morgan Stanley also expressed optimism about the company's future under Niccol's leadership, maintaining an Overweight rating with a $98.00 price target.
Analysts predict that under Niccol's guidance, Starbucks can reinvigorate its traffic growth and achieve its previous margin targets, potentially leading to an earnings growth exceeding 15% over the next three years.
In the wake of these recent developments, Starbucks' third-quarter earnings per share met market expectations, with the company confirming its financial guidance for fiscal year 2024 and anticipating a sequential rise in revenue and EPS growth.
However, there are still many unanswered questions regarding Starbucks' future, including a potential near-term adjustment in the fiscal year 2025 earnings projections. Despite these uncertainties, the firm justifies a "recovery premium" for Starbucks' stock, setting a one-year price target of $120 per share.
InvestingPro Insights
As Starbucks Corporation (NASDAQ:SBUX) welcomes new CEO Brian Niccol and receives a favorable upgrade from Deutsche Bank, investors may find value in considering additional metrics and insights. According to InvestingPro data, Starbucks currently boasts a robust market capitalization of $108.67 billion, indicating significant presence and influence in the market. Additionally, the company has demonstrated a steady revenue growth of 4.17% over the last twelve months as of Q3 2024.
InvestingPro Tips highlight Starbucks' consistent performance and investor-friendly actions, such as raising its dividend for 14 consecutive years, signaling a commitment to returning value to shareholders. Moreover, the stock has shown a significant return over the last week, month, and three months, with figures like a 27.37% price total return in the last week alone, showcasing recent investor confidence.
For those seeking further insights and analysis, InvestingPro offers additional tips on Starbucks, including the latest earnings revisions and financial health indicators. With 21 analysts revising their earnings downwards for the upcoming period, investors should stay informed on the company's financial trajectory. For comprehensive analysis and more tips, investors can explore the full suite of resources at InvestingPro.
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