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Starbucks' Howard Schultz teases new game-changing platform during his farewell conference call

Seeking Alpha logo Seeking Alpha 2/3/2023

Starbucks Corporation (NASDAQ:SBUX) traded lower early on Friday after delivering strong results for FQ1 globally with the exception of China. On Wall Street, analysts kept their largely bullish stances on Starbucks

Cowen Andrew Charles pointed out that while Starbucks' (SBUX) comparable sales performance in China was far worse than anticipated for December, the highly improved pace for January is an encouraging sign. The firm maintained 2023 EPS guidance to reflect the nonlinear China recovery, with the expectation that the second half will make up for a slow start. Cowen has an Outperform rating on SBUX and price target of $116.

Bank of America analyst Sara Senatore expects the China reopening and annualization of labor investments to drive margin expansion in the second half of the year. The firm trimmed its EPS estimate for Q1 but kept F23-F24 estimates unchanged. At present, SBUX is noted to be trading at a relative multiple of 1.5X (absolute multiple of 29.7X), in line with its 5-year and 10-year averages. "We believe this valuation appropriately reflects SBUX’s long term growth prospects," noted Senatore. BofA has a Buy rating on SBUX and increased price objective of $138.

Meanwhile, Wells Fargo analyst Zachary Fadem said investors should use any weakness in SBUX shares as a buying opportunity. He noted results everywhere were robust with U.S. comparable sales up 10% and international non-China 25% higher.

What is next for Starbucks (SBUX)? Interim CEO Howard Schultz was up to his old tricks on the conference call and teased that an exciting new platform is on the way.

"While I was in Italy last summer, I discovered an enduring, transformative new category and platform for the company, unlike anything I had ever experienced. The word I would use to describe it without giving too much away is alchemy. We won't unveil details today, but it will be a game changer, so standby."

The earnings call appearance is expected to be the last for Howard Schultz, who bought the first Starbucks retail unit in 1986.

Shares of Starbucks (SBUX) fell 2.06% in premarket trading on Friday.

Read the full earnings call transcript.

Now read: Starbucks earnings preview: China reopening and U.S. resiliency could be the coffee buzz


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