Starbucks Gets Cowen Upgrade On Expectations Of Footfalls Reaching Pre-Pandemic Levels: What You Should Know

The world’s largest coffee chain Starbucks Corp’s SBUX customer visitation is expected to go back to pre-COVID-19 levels for when the vaccine is widely available, according to a survey conducted by Cowen Equity Research.

The Starbucks Analyst: Cowen analyst Andrew Charles has an Outperform rating on Starbucks stock and raised the price target from $112 to $120.

What Happened: Based on a survey involving 2,500 customers, the Cowen analysts expect minimal disruption to coffee shop visitations once the pandemic ends — prompting the firm to raise the price target to $120 from $112. It also added Starbucks as a favorite "reopening" stock.

See also: How to Buy Starbucks Stock

Cowen raised the quarterly same-store sales estimates for the Seattle-based coffee chain in the Americas (~90% U.S.) to 8%, 79% and 18% for the second, third and the fourth quarter of 2021, compared with its previous estimate of 7%, 76% and 14%.

The brokerage also revised the 2021-23 EPS estimate to $2.89, $3.50 and $4.02, compared with its previous estimates of $2.85, $3.40 and $3.89. It now forecasts 2021 revenue of $28.9 billion, near the high-end of the guided $28-$29 billion range, vs consensus of $28.5 billion.

The Starbucks Thesis: Cowen sees Americas’ same-store sales as the key metric for Starbucks which has been relying more on delivery, new drive-thrus, product launches, and loyalty programs to make up for lost business after being hit by the second wave of COVID-19 infections and accompanying restrictions.

“We are encouraged by the implied stability suggested by respondents when comparing post-vaccine expectations to pre-COVID-19 habits,” Charles wrote in a research note.

“Starbucks is pursuing the right structural drivers to help transcend displaced morning routines, including broadening payment options beyond a gift card for customers to join the loyalty program, the addition of curbside pick-up to 22% of U.S. company-operated locations by fiscal 2021-end and on-trend plant-based menu innovation.”

Cowen also raises its 2023 estimate for operating margin to 19% from 18.6%.

In January, Starbucks said it expects second-quarter U.S. comparable sales to rise between 5% and 10% and in China, its biggest growth market, it forecast sales to grow nearly two-folds.

Price Action: Starbuck shares, which have risen 7% year-to-date, closed about 0.8% lower on Wednesday at $110.46.

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