By Senad Karaahmetovic
Despite shares of Starbucks (NASDAQ:SBUX) falling 1.38% yesterday, the stock still outperformed the vast majority of the market given the extensive selling pressure in response to another red-hot CPI report.
Starbucks held its 2022 Analyst Day yesterday where its leaders showcased the company’s Reinvention plan. Investors and analysts have reflected positively on the new mid-term financial projections.
The company said it expects 15%-20% adjusted EPS growth in FY23-FY25, pushing its shares over 2% higher in premarket Wednesday.
“Starbucks is a growth company, and our accelerated expansion is a direct reflection of the expected returns from our Reinvention plan,” said Chief Financial Officer Rachel Ruggeri.
“By making strategic and highly targeted investments to drive value for partners, Starbucks will also drive value for customers and shareholders, while managing costs, improving margins, and elevating the Starbucks Experience for all stakeholders.”
Elsewhere, Starbucks sees global comp sales growth of 7%-9% and global revenue growth of 10%-12% for the same time period. Moreover, SBUX said it expects to see its margins expand in each of the next 3 years.
A Barclays analyst said new projections reflect “an acceleration on all key growth metrics.” Hence, Barclays is a buyer of Starbucks shares at current levels. The analyst also raised the price target to $100 from $96.
“We believe few other names across the consumer landscape offer proven, industry leading growth at scale, with scarcity value to provide valuation support,” the analyst said in a client note.
A BofA analyst reaffirmed the Buy rating and a $109 per share price target as the company delivered above-consensus financial projections.
“Starbucks has set a high bar for itself and while we believe it is achievable given brand strength and new management capabilities, we believe skepticism persists about the challenges of accelerating growth - in particular at a time of macro uncertainty,” the BofA analyst wrote in a client note.
For a Citi analyst, some investors “may balk at a headline (15-20% EPS 3-Yr CAGR)” as the company previously failed to deliver on “overly aggressive targets.” He remains Neutral-rated on SBUX with a $94 per share.
“Shares may see moderate NT upside with downside earnings scenarios de-risked and a safety trade into year-end (e.g., management sounded very confident about NT US SSS), but we expect SBUX’s optimistic base case scenario (e.g., HSD US SSS growth along with a China recovery) limits upside,” the Citi analyst said in a research note.