BofA Securities has increased its price target on Starbucks Corporation (NASDAQ: NASDAQ:SBUX) shares to $118 from the previous target of $112 while retaining a Buy rating on the stock.
The adjustment reflects a heightened confidence in the company's operational performance.
The firm's analyst cited the application of a higher relative multiple, moving from 1.2x to 1.3x, as a key factor for the revised price objective. The change is based on the belief that Starbucks is showing stronger execution in its business strategies.
The new price target also incorporates a higher absolute multiple, adjusted to 25.9x from 24.6x, applied to the unchanged forward earnings per share (EPS) projection for the period of the fourth quarter of fiscal year 2025 to the third quarter of fiscal year 2026, which remains at $4.55.
In addition to the price target hike, the analyst also increased the forecast for Starbucks' fiscal year 2027 earnings per share to $5.20, up from the previous estimate of $5.11. This revised EPS projection is supported by an expectation of higher steady state comparable store sales growth, now anticipated at 4% instead of the earlier 3.6%.
In other recent news, Starbucks Corporation's North American CEO, Michael Conway, announced his retirement effective November 30, 2024. The company has yet to announce a successor for the role.
Concurrently, Starbucks has been the focus of multiple analyst firms. Goldman Sachs reaffirmed a Buy rating on Starbucks, highlighting the company's commitment to enhancing customer experience and operational efficiency.
TD Cowen and BMO Capital set a price target of $110, expressing confidence in new CEO, Brian Niccol, to drive Starbucks' growth. Despite a 6% decrease in North American transactions in the June quarter, analysts expect Starbucks to see earnings growth exceeding 15% over the next three years under Niccol's guidance.
BMO Capital Markets elevated the company's price target from $100 to $110 while maintaining an Outperform rating. Baird equity research firm also maintains an Outperform rating for Starbucks.
InvestingPro Insights
Following BofA Securities' optimistic outlook on Starbucks Corporation, a peek into real-time data from InvestingPro reveals additional insights into the company's financial health and market performance. Starbucks has demonstrated a robust return over the last three months, with a 20.98% price total return, reflecting its strong standing in the market. The company's commitment to shareholder value is evident through its consistent dividend growth, having raised its dividend for 14 consecutive years, and the dividend yield currently stands at a solid 2.36%.
The InvestingPro data also shows that Starbucks operates with a moderate level of debt and maintains a healthy P/E ratio of 26.86, which, while high relative to near-term earnings growth, indicates investor confidence in the company's future profitability. Analysts predict Starbucks will be profitable this year, supported by a gross profit margin of 27.61% over the last twelve months as of Q3 2024.
It's noteworthy that Starbucks is a prominent player in the Hotels, Restaurants & Leisure industry, and its operational performance is reflected in its substantial market cap of 109.29B USD. For investors seeking more in-depth analysis, there are additional InvestingPro Tips available, which could further inform investment decisions.
For those interested in exploring these metrics further, additional InvestingPro Tips can be found at https://www.investing.com/pro/SBUX, which may provide a more comprehensive understanding of Starbucks' strategic positioning and financial nuances.
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