Starbucks: Analysts Favor a ‘Hold’ Rating



Analysts’ recommendations

Among the 29 analysts that follow Starbucks (SBUX), 41.4% recommended a “buy,” 55.2% recommended a “hold,” and 3.4% recommended a “sell.” Analysts have given Starbucks a 12-month target price of $71.54, which implies a fall of 4.8% from its stock price of $75.12.

Since the beginning of April, Cowen, Piper Jaffray, and UBS have raised their target prices. Cowen raised its target price from $63 to $69. Piper Jaffray increased the company’s stock price from $60 to $70. UBS has increased its target price from $72 to $78. However, UBS downgraded the stock from “buy” to “neutral.”

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Peer comparisons

Among the 25 analysts that follow Dunkin’ Brands (DNKN), 25.0% recommended a “buy,” 76.0% recommended a “hold,” and 4.0% recommended a “sell.” On average, analysts’ 12-month target price for Dunkin’ Brands is $72.20, which implies a fall of 5.2% from its stock price of $76.16.

Among the 29 analysts covering McDonald’s (MCD), 79.3% recommended a “buy,” while 20.7% recommended a “hold.” Analysts’ 12-month target price for McDonald’s is $199.64, which represents a rise of 4.2% from its stock price of $191.61.

Valuation multiple

The increase in Starbucks’s stock price since the announcement of its first-quarter earnings on January 24 raised its valuation multiple. As of April 17, the company was trading at a forward PE ratio of 26.4x—compared to 23.4x before the announcement of its first-quarter earnings. On the same day, McDonald’s and Dunkin’ Brands were trading at forward PE ratios of 24.9x and 23.1x, respectively.


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