Buy Starbucks Shares Aggressively On Any Short-Term Pullbacks

“Following signs of widespread December softness for retailers/restaurants, the short-term setup for Starbucks Corporation SBUX heading into the FQ1 report does not look particularly compelling,” Baird’s David E. Tarantino said in a note, while maintaining an Outperform rating and price target of $65.

Buy On Pullback

At the same time, the analyst believes Starbucks should be able to deliver “good relative performance” against a difficult backdrop, and the stage is set for the company to drive an acceleration in comps momentum going forward.

“Based on this outlook, we continue to view the near-term risk/reward favorably on the stock, and we would buy aggressively on any short-term pullbacks,” Tarantino mentioned.

Q1 Expectations

Starbucks is scheduled to report its FQ1:17 results Thursday, and the analyst pointed out that the global comps and EPS estimates have been lowered due to signs of weakness across retailers and restaurants in the United States during December.

“While we still see a scenario in which SBUX was able to reach consensus estimates, the difficult operating backdrop in December leads us to believe slight downside risk is more likely than upside potential,” Tarantino stated.

On the other hand, the analyst also noted that despite weak industry demand and challenging year-ago comparison, comps close to 3 percent would represent “standout performance” for Starbucks against a difficult backdrop.