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Starbucks

Starbucks shares fell about 2% in post-trading hours on Tuesday after the world’s leading specialty coffee retailer reported lower-than-expected revenue in the fiscal second quarter of 2021, although the coffee chain raised its full-year guidance.

The Seattle-based retailer said its consolidated net revenues rose 11% from the prior year to $6.7 billion, missing Wall Street’s consensus estimates of $6.82 billion.

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Following this, Starbucks shares slumped about 2% to $144.16 after trading hours on Tuesday. The stock rose over 8% so far this year.

However, the world’s leading restaurant chains reported non-GAAP earnings per share of $0.62, up from $0.32 in the prior year. That was also higher than the analysts’ expectations of $0.52 per share.

Starbucks raised its forecasts for revenue and profit for the fiscal year 2021 to $28.5 billion-$29.3 billion and non-GAAP EPS in the range of $2.90-$3.00, up from the previous projection of $28.0 billion-$29.0 billion and $2.70-$2.90, respectively.

Analyst Comments

“Bottom line beat driven by exceptional margin performance, while top-line ~ expectations, but underscoring full recovery vs pre-COVID-19. Guidance raised as hoped, but we still see room for upside. Full valuation/high expectations likely keep NT stock reaction in check. Raise price target to $120, maintain Equal-weight,” noted John Glass, equity analyst at Morgan Stanley.

“FY21 guidance was raised for a few key items based on better-operating results, including revenue of $28.5-29.3B vs prior guidance of $28-29B; adj. operating margin of 16.5-17.5% (from 16-17%) which is still expected to lag the sales recovery by two quarters and should reach the longer-term 18-19% target by yearend (our estimate is above this); adj. EPS of $2.90-3.00 from $2.70-2.90 previously (both with 10c from the 53rd week and comparing to our prior estimate of $2.84 and consensus $2.85); and a more favorable tax rate in the low to mid-20%s from mid-20%s prior. Other items including comps, new store openings, capex and interest expense for the year were reiterated.”

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Starbucks Stock Price Forecast

Twenty analysts who offered stock ratings for Starbucks in the last three months forecast the average price in 12 months of $121.76 with a high forecast of $137.00 and a low forecast of $104.00.

The average price target represents a 4.83% increase from the last price of $116.15. Of those 20 analysts, 13 rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the base target price of $120 from $110 with a high of $150 under a bull scenario and $79 under the worst-case scenario. The firm gave an “Equal-weight” rating on the coffee retailer’s stock.

Several other analysts have also updated their stock outlook. CFRA raised the stock price forecast to $125 from $115. Jefferies lifted the target price to $135 from $118. Stifel upped the price objective to $124 from $115.

Moreover, UBS increased the stock price forecast to $118 from $109. Stephens raised the target price to $115 from $100. Oppenheimer lifted the price objective to $135 from $122.

“Raise PT, reiterate Buy. Recovery ongoing in the U.S. and China predicated on a powerful and trusted brand, and we expect the LT framework to prove realistic and drive best-in-class TSR. PT to $135 (from $118) as we shift our multiple to 21.5x our newly introduced’C23E EBITDA of $7.9B, in line with global large-cap growth,” noted Andy Barish, equity analyst at Jefferies.

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