Jeffery Bernstein, restaurant analyst at Barclays Capital, just raised his price target for Starbucks, predicting 2012 will yield "grande results" but "venti" expectations for the coffee maker.
He thinks the input costs of making that large venti cappuccino will soon go down.
"Starbucks entering 2012 has tremendous fundamental momentum," Bernstein said. "As we move through the year, as coffee costs ease, you really should see an accelerated earnings growth."
Starbucks beat the Street's earnings estimate on Thursday, reporting 50 cents a share in the first quarter. It raised its full-year earnings outlook to $1.82 a share from $1.78.
But if there's anything that will tone down the company's caffeine buzz, it will be growing too big, too fast.
"They have huge aspirations to expand into the consumer products business to rival their core retail business," said Bernstein. Consumer products, meant for households rather than bistros, is a much different business platform than in-store retail, for which Starbucks is known.
"Consumer products will likely provide some hiccups, and management is doing everything they can to prepare for them," said Bernstein.
If the venture disappoints, less-expensive competitors Dunkin Brands, McDonald's, and Green Mountain will be waiting on the sidelines to pick up market share.
So far, however, Bernstein isn't worried.
"They're targeting a higher income consumer," he said of Starbucks, "and they've proven to be more insulated from competitors than we thought. Most investors anticipate that they can sustain an 8 percent to 10 percent [increase in revenue], which in the U.S. economy is heroic."
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Disclosures:
Neither Jeffery Bernstein nor Barclays own Starbucks shares.
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