'Satisfying Growth': Oppenheimer Raises Starbucks Price Target Ahead Of Q3 Print

Oppenheimer has raised its price target on Starbucks Corporation SBUX stock from grande to venti.

The Analyst 

Brian Bittner maintained an Outperform on Starbucks and raised the price target from $82 to $95.

The Thesis

Although Starbucks 37% year-to-date gain has created a more difficult setup heading into the company’s third-quarter report, expected July 25, Bittner said his refreshed analysis forces him to increase earnings estimates, raise the price target and reiterate an Outperform rating.

“Our work highlights a unique opportunity for the Street’s earnings outlook to improve on better-than-expected path for margins. Simultaneously, we identify healthy SSS drivers that could sustain strong trends against subdued consensus forecasts over the next several quarters,” the analyst said in a Thursday note. (See his track record here.)

Oppenheimer is modeling a slight earnings beat ahead of the third-quarter print and is expecting same-store sales growth to come in ahead of the consensus estimate  at positive 5%. 

Recent operating momentum is now paired with a Nitro beverage roll-out, elevating digital accretion and delivery expansion, Bittner said. 

"Since December, digital relationships are +50%, presenting a massive loyalty conversion opportunity where spend/frequency is robust."

Loyalty members now make up 41% of sales for Starbucks, according to Oppenheimer.

Concerns of competition in China have been a dominant theme around the Starbucks investment thesis.

“While China competition continues to worry investors, we believe industry growth paired with fresh internal drivers will drive satisfying growth," Bittner said. 

Price Action

Starbucks shares were up 0.11% at $88.48 at the time of publication Thursday. 

Related Links:

Starbucks Shares Perk Up After Q1 Earnings Beat

Analysts Bullish On Starbucks Despite Fast-Moving Chinese Competition