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Analysts In Cars Getting Coffee: JPMorgan Upgrades Starbucks After Traveling To HQ

Jayson Derrick

JPMorgan analysts met with Starbucks Corporation (NASDAQ: SBUX) management at its headquarters and drove home bullish on the coffee restaurant chain.

The Analyst

JPMorgan analyst John Ivankoe upgraded Starbucks from Neutral to Overweight with a price target lifted from $90 to $94.

The Thesis

Starbucks' management team showed a "high degree of confidence" that its objective of growth at scale is working through the medium term, Ivankoe said. Of particular note, management implemented a new strategy of "doing fewer things and doing them well" with fewer limited time menu options and more permanent innovation.

Management also emphasized it's a "beverage first" company and food will play a role as add-on or grab-and-go options. Ivankoe said the company has also learned an "expensive lesson" from its Mercato Lunch Menu and similar projects won't be tried again. Instead, Starbucks will offer food items that pair well with beverages, including a near-term use of plant-based protein.

Under the leadership of CEO Kevin Johnson, Starbucks is creating a "world class AI and analytics team" to not only support customer ordering but inventory anticipation and labor scheduling, the analyst wrote in a note. The front-to-back store-level initiative is likely among the best among all brands under the analyst's coverage.

Overall, Starbucks management appears to be "much more confident" in its business and outlook and marks a "very different feeling" from a low-point in mid-2018.

Price Action

Shares of Starbucks were trading higher by 1.5% at $87.80.

Related Links:

Starbucks Takes Advantage Of Cold Brew Growth For The Holiday Season

Starbucks To Open Largest Store In Chicago: 5 Stories, Cocktail Bar, 3 Coffee Bars And More

Latest Ratings for SBUX

Date Firm Action From To
Dec 2019 Upgrades Neutral Overweight
Dec 2019 Initiates Coverage On Outperform
Nov 2019 Maintains Buy

View More Analyst Ratings for SBUX
View the Latest Analyst Ratings


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