BMO Says Starbucks Is A 'Reopening Beneficiary,' Upgrades To Outperform

Starbucks Corporation SBUX should be considered as a "reopening beneficiary" and the coffee chain giant is well-positioned to show upside versus expectations, according to BMO Capital Markets.

The Starbucks Analyst: Andrew Strelzik upgraded Starbucks from Market Perform to Outperform with a price target lifted from $102 to $120.

The Starbucks Thesis: Starbucks boasts multiple catalysts to grow at a faster-than-expected rate in the coming years, Strelzik wrote in the note.

Starbucks should benefit from "rising consumer mobility" as the health crisis starts to ease. This should benefit breakfast and morning sales, especially in urban areas.

Management's continued store closures and transformations should benefit comps moving forward.

Loyalty membership usage in the U.S. and China both grew at the fastest rate in nearly two years. Encouragingly, U.S. app download data is showing signs of accelerations as restrictions continue to ease.

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Starbucks faces an easier competitive environment in China amid Luckin's bankruptcy filing/slower growth prospects along with Costa's decision to accelerate closures in China. Strelzik said this should generate new market share opportunities for Starbucks.

Margin recovery has been a key driving contribution to earnings per share upside in the past few quarters. Investors should not be surprised if Starbucks' guided recovery margins are conservative given top-line momentum.

SBUX Price Action: Shares of Starbucks were trading higher by 0.4% Tuesday morning at $102.30.