At its recently held Investor Day meet, multinational specialty coffee retailer Starbucks (NASDAQ:SBUX) announced a reinvention plan, with a new growth strategy in focus. Among those that emerged bullish after the meet was BTIG analyst Peter Saleh, who was particularly impressed with the company’s international growth strategy.
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New Strategy Indicates Promising Outlook for Starbucks
The analyst recognized that Starbucks’ new growth plan is based on “unit development, digital strategy, international and store efficiency,” which makes the company’s outlook look “shockingly good.”
“The new financial targets were almost shockingly good, leaving us both impressed and slightly curious as to what the unlock was vs. previous outlooks,” Saleh said.
Interestingly, Starbucks expects to expand its China operations by 50% by Fiscal 2025 (FY25). The company plans to achieve this by opening one new store every nine hours for the next three years until the number of stores in China reaches 3,000. This will not only enable the company to achieve a two-fold rise in sales by FY25 but also boost its operating income four times.
Meanwhile, at the Investor Day event, the company announced that it will invest $450 million to automate and simplify the operations of its North American stores in FY23. The company is planning to equip these stores with new ovens, ready-to-go food warming equipment, Cold Press Cold Brewing systems, and machines that cut down prep time for food and beverages, allowing Starbucks to serve more customers per day.
Saleh is also upbeat about the financial targets provided by the company. Revenue and earnings per share growth targets over FY23-FY25 are 10%-12% and 15%-20%, respectively.
The analyst was also encouraged by the company’s commitment to returning shareholder value, with the resumption of its share repurchase program.
While reiterating his Buy rating and a price target of $110 on SBUX stock, Saleh said, “We believe that prior momentum is returning as coronavirus disruption fades and customer mobility returns, setting up a strong sales and earnings recovery outlook over the coming quarters. This recovery outlook, combined with the company’s financial discipline and broad geographic and customer profile, leads to our Buy rating.”
What Is the Price Target for SBUX Stock?
SBUX’s average price target of $96.68 implies upside potential of almost 5%. Analysts tracked by TipRanks have a Moderate Buy rating on the stock, which is based on 11 Buys and 12 Holds.
Final Thoughts
Saleh is certain that “many of the catalysts are coming together to drive shares higher into 2023.” This makes the analyst firmly believe that the company can be a great portfolio addition despite trading at a premium over its three-year historical average.
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