The Street Mostly Agrees: Starbucks Print Shows 'Positive, Less Controversial' Quarter

Coffee chain Starbucks Corporation SBUX reported Thursday afternoon with a top-and bottom-line first-quarter beat. Here's how the Street reacted. 

The Analysts

• Morgan Stanley's John Glass maintains an Equal-weight rating on Starbucks with an unchanged $70 price target.
• UBS' Dennis Geiger maintains at Buy, unchanged $72 price target.
• Bank of America Merrill Lynch's Gregory Francfort maintains at Buy, price target lifted from $72 to $75.
• Baird's David Tarantino maintains at Outperform, price target lifted from $71 to $74.
• Tigress Financial Partners' Ivan Feinseth.

Morgan Stanley: 4 Takeaways

Starbucks reported a "positive, less controversial quarter" with four key takeaways, Glass said in a note. They are: 

• EPS of 75 cents, including a 7-cent-per-share gain from tax benefits and a 4-cent benefit from a lower share count.
• U.S. and Americas comps of 4 percent and flat transactions imply traffic improvement compared to a 1-percent transaction decline last quarter.
• Comps in China at 1 percent mark stability versus last quarter, but still show deterioration on a two-year stacked basis.
• The Channel Development contains too many "moving pieces" to accurately model, but the Nestle partnership should ramp and expand moving forward.

UBS: Domestic Momentum Continues

Starbucks' domestic business showed a sequential improvement in transactions, helped in part by "good" holiday season performance and digital initiatives, Geiger said in a note.

The momentum can carry over into Q2 with 4-percent same-store sales growth and into the end of the year, the analyst said. 

Starbucks boasts multiple sales drivers and new product innovation like the availability of Nitro in all stores by the end of the year, Geiger said. More importantly, management's digital and loyalty engagement initiatives will be enhanced in the spring and should result in better conversion, he said. 

Related Link: Analysts Bullish On Starbucks Despite Fast-Moving Chinese Competition

Bank Of America: China 'Solid'

Starbucks' China business posted a "solid" 1-percent comp gain versus expectations for macro pressures and concerns to usher in a negative comp, Francfort said in a note.

Encouragingly, the research firm's checks on Chinese social media trends found weakness in search mentions for rival names, but not Starbucks — despite growing competition from local coffee chains, the analyst said. 

Baird: 'Positive Tone' For New Quarter

Starbucks didn't offer any update on fiscal Q2 trends so far, although the coffee chain's management projected a "positive tone" surrounding overall momentum and digital initiatives, Tarantino said in a note. The scheduled upgrade to the Rewards program and corresponding marketing campaign are likely to support continued same-store sales momentum, he said. 

Tigress: Further Upside On Horizon 

Starbucks has already bought back $14 billion of its stock and is likely on track to hit its target of $25 billion next year, Feinseth said in his daily newsletter. The company is showing success in all of its growth initiatives, which is making positive contributions, he said. 

Further upside in Starbucks' stock is likely, and Feinseth said he continues to recommend the stock. 

Related Link: Goldman On Restaurants: Buy Texas Roadhouse, Sell Yum, Hold Starbucks

Price Action

Starbucks shares were up 2.75 percent at $66.52 at the time of publication Friday.