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Starbucks’s 3Q17: What to Expect from the Unicorn Frap Giant

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Part 6
Starbucks’s 3Q17: What to Expect from the Unicorn Frap Giant PART 6 OF 6

Why Wall Street Says ‘Buy’ ahead of Starbucks’s Q3 Earnings

Target price

Although Starbucks’s (SBUX) stock price has fallen since the announcement of its fiscal 2Q17 earnings, analysts have raised their target prices. As of July 14, 2017, analysts are expecting Starbucks’s stock price to reach $66.52 in the next 12 months, which represents a potential return of 13.2% from its current stock price. The initiatives the company has undertaken to drive same-store sales growth and an aggressive expansion plan in the CAP region could have compelled analysts to raise target prices.

Why Wall Street Says &#8216;Buy&#8217; ahead of Starbucks&#8217;s Q3 Earnings

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The target price and potential return for Starbucks’s peers in the next 12 months are as follows.

  • Domino’s Pizza (DPZ) has a target price of $205.4, which implies a fall of 1.8% from its current stock price.
  • Dunkin’ Brands (DNKN) has a target price of $55.95 with return potential of 3.7%
  • McDonald’s (MCD) has a target price of $159.40 with return potential of 2.7%.

Analysts’ recommendations

Of the 33 analysts that follow Starbucks, 81.8% are recommending “buy” and 18.2% are recommending “hold.”

KeyBanc Capital Markets is more optimistic about Starbucks. On June 23, 2017, KeyBanc has upgraded the stock to “overweight” and set the 12-month target price at $68.0, which represents a return potential of 15.7%. KeyBanc stated that the company’s strategy to encourage customers to spend more by adding more premium food and drink options could drive its EPS to grow 15%.

On June 14, 2017, Wedbush Securities downgraded the stock to “neutral,” fearing the company could fail to meet analysts’ same-store sales growth expectations in fiscal 3Q17. But Wedbush has retained its 12-months target price at $65.0.

The target price is greater than the company’s current stock price, which doesn’t mean an automatic “buy.” Investors have to carefully analyze the kinds of parameters we discussed in our earlier articles before making any investment decisions.

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