Starbucks' Margin Clarity on Investor Day a 'Key Catalyst' - Cowen

© Reuters. Starbucks (SBUX) Margin Clarity on Investor Day a 'Key Catalyst' - Cowen

By Sam Boughedda

A Cowen analyst raised the price target on Starbucks (NASDAQ:SBUX) to $104 from $94, maintaining an Outperform rating on the stock.

The analyst was positive in his research note, telling investors they see the highest probability that the 9/13 investor meeting will be a positive catalyst if a new CEO with a strong track record is named and long-term operating margin guidance is provided containing 17% in the range.

"We see opportunities to expand margins while investing behind growth, aided by refranchising and G&A reduction," said the analyst. "Starbucks will host its biennial investor day on September 13. Since the December 2020 meeting, the company has executed well on the top line domestically, with a successful playbook focused on digital, on-trend iced beverages & plant-based alternatives and My Starbucks Rewards (MSR) loyalty, in an improving employment backdrop."

The analyst said they are looking for two key announcements at the meeting: whether the company will announce a new CEO and consolidated operating margin guidance containing 17% in the range.

"We view America's same store sales as the key metric for SBUX, given a +0.86 correlation with SBUX's forward P/E multiple pre-COVID-19," added the analyst. "We believe Starbucks is pursuing the right structural drivers including on-trend iced & plant-based beverages, broadening payment options beyond a Starbucks gift card for customers to join the My Starbucks Rewards loyalty program and making digital ordering more frictionless, while enjoying the benefit of white collar return to office."

"This should help Starbucks extend the sales recovery and gives us confidence in potential upside to comps. However, the company needs to communicate a capable new CEO to succeed interim CEO Howard Schultz and provide greater visibility into the 2023-25 financial outlook so investors can gain more confidence. We expect margin clarity at the investor day to be a key catalyst for shares."