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.Â
"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."Â
Additional
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Short
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Views: McDonalds Vs Starbucks - Which is the Better
Buy?
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Disclosures:
Neither Jeffery Bernstein nor Barclays own Starbucks
shares.
Disclaimer