Starbucks' Recovery Looks 'Durable,' Cowen Says In Upgrade

Coffee chain Starbucks Corporation SBUX is showing signs of a "durable" recovery, according to Cowen. 

The Starbucks Analyst: Andrew Charles upgraded Starbucks from Market Perform to Outperform with a price target lifted from $77 to $99.

The Starbucks Takeaways: Starbucks is scheduled to report fourth-quarter results on Oct. 29, and Americas same-store sales should come in better than expected at down 13%, Charles said in a Wednesday upgrade note.

The continued strength observed in the U.S. and China should come in strong enough to "overpower" weakness in other international regions like Canada and Japan, the analyst said. 

Starbucks is expected to provide fiscal 2021 guidance, and it should also come in ahead of the current Street estimate of $2.69 per share, he said. 

Starbucks has three catalysts ahead to give its stock a "jolt," Charles said: 

1. Starbucks' focus on digital ordering and wellness-centered menu innovation. This should help the coffee chain return to 2019 U.S. sales volume by the end of March.

2. Americas revenue should outpace the combination of same-store sales and net restaurant growth. This "modeling nuance" is not factored in by Street estimates because the company only reports its closures on an annual basis.

3. Starbucks should benefit from continued G&A rationalization and/or refranchising of several large markets. This could translate to more cash returns to shareholders and help lift the long-term EPS growth profile.

SBUX Price Action: Shares of Starbucks were trading higher by 2.55% to $86.96 at the time of publication Wednesday. 

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