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Starbucks Stock Rises on Upgrade from JPMorgan

Starbucks has been upgraded by JPMorgan over signs the coffee giant could beat sales targets with solid growth in the U.S. and China.

Starbucks has been upgraded by JPMorgan over signs the coffee giant could beat sales targets with solid growth in the U.S. and China

Starbucks has been upgraded by JPMorgan over signs the coffee giant could beat sales targets with solid growth in the U.S. and China.

JPMorgan analyst John Ivankoe upgraded Starbucks to overweight from neutral on Thursday after meeting with executives, sending shares 1.7% higher in premarket trading.

The same analyst downgraded the stock to neutral in July and further upside was limited as shares had risen more than 90% over a year — the first time JPMorgan hasn’t had an overweight rating on the coffee chain in more than 15 years.

However, Ivankoe said the company was well placed to exceed sales and margin targets, expecting 5% comparable sales growth in the U.S. and 1-3% growth in China led by beverage sales and innovation.

Chinese rival Luckin Coffee has rapidly expanded in recent years to compete with the U.S. company. But Ivankoe said Starbucks’ pace of innovation in China in faster than anywhere else in the world and that Chief Executive Kevin Johnson has planned 5 one-week trips to the country each year, highlighting the region’s importance.

JPMorgan set a target price of $94 on the stock, up from $86.59 at the close on Wednesday.

“We believe numerous sales drivers including beverage-led comparable growth, U.S. and China unit development, the global coffee alliance and operations initiatives are matched with meeting if not exceeding set sales and margin objectives, allowing the stock to sustain a premium multiple,” Ivankoe said in a note.

The coffee giant’s stock has risen 35% so far in 2019, jumping significantly after both third-quarter and fourth-quarter earnings reports, despite the latter being followed by downbeat guidance. Investors cheered Starbucks’ use of technology to grow orders and customer loyalty, as well as a boost from iced coffee and cold drinks.

Looking ahead.

The threat of Luckin Coffee in China, as well as a growth slowdown in the country, has concerned investors. However, JPMorgan’s note shows a renewed confidence among the management to continue sales momentum and achieve its “growth at scale” plan.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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