Why JPMorgan Upgrades Starbucks After Stock Underperformance

Starbucks Corporation’s SBUX stock has "underperformed our low expectations” since December 2021, which includes the announcement of the company’s fiscal first-quarter earnings in February, according to JPMorgan.

The Starbucks Analyst: John Ivankoe upgraded the rating for Starbucks from Neutral to Overweight, while keeping the price target unchanged at $101.

The Starbucks Thesis: Consumption habits in the U.S. are recovering towards the pre-COVID-19 pandemic levels, Ivankoe said in the upgrade note.

“China is a near-term focus with slower than previously anticipated recovery,” he added.

“Getting timing right of China’s domestic policy is beyond our purview, but as the world's #2 economy, we believe time will at least sort out COVID-era restrictions as it has nearly everywhere else in the world,” the analyst wrote.

“Valuation supports 'more upside than downside,' even on lower numbers, and while the catalyst for near-term movement is elusive, investors should allow for mean-reversion and valuation in itself to drive stock outperformance,” Ivankoe further mentioned.

SBUX Price Action: Shares of Starbucks had risen by 6.95% to $88.92 at the time of publication Wednesday.

Photo: Courtesy Starbucks