Starbucks Advances Due to Earnings Surpass, Analysts Raising Targets
Following the company's release of better-than-anticipated Q3 results, shares of Starbucks (NASDAQ:SBUX) are trading more than 3% higher in pre-open Friday trading.
Starbucks beat the average estimate of an EPS of $0.73 on revenues of $8.33 billion by reporting an EPS of $0.81 on $8.4 billion in revenue. Revenue increased by 3% over a 13-week period. Starbucks reported that strong performance in North America and U.S. sales were the main factors in the 7% increase in its global comparable store sales. Comparable sales dropped 16% in China.
The average ticket price increased by 8%, driven once more by North America (+10), offsetting a decline of 1% in the average ticket price for the rest of the world.
"Throughout the entire year and in the fourth quarter, we observed an increasing demand for Starbucks coffee worldwide. And our Q4 numbers show early proof of the effectiveness of our U.S. Reinvention efforts," stated Howard Schultz, Starbucks' interim CEO.
Starbucks provided outlook on the earnings call that was consistent with the recent Investor Day commentary. The business anticipates stable U.S. growth as well as a comeback in China.
After a "strong" quarter, Citi analysts increased their price estimate for the stock from $90 to $93 per share. They are still sceptical about the setup and have a Neutral rating.
They stated in a client note that while "shares may see a spike on a US headline beat/coming up FY23 EPS forecasts," they "see little cause for a meaningful, sustained leg-up without colour on how these initiatives build to LT projection."
The Natural rating on the SBUX stock was also reiterated by Piper Sandler analysts.
The analysts claimed that from a stock viewpoint, balancing the transactional and relational nature of the brand equity is what unlocks upside rather than unit growth or tech investments alone.
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