Cowen upgrades Starbucks, says company implementing strategies that will pay off after pandemic

Published Wed, Sep 30 20208:33 AM EDTUpdated Fri, Oct 2 20208:08 AM EDT

(This story is for CNBC Pro subscribers only.) The Covid-19 crisis is helping Starbucks reset its business strategy, shedding unneeded assets and focusing on customer innovation, according to Cowen. The Wall Street firm upgraded shares of Starbucks to outperform from market perform, sending shares of the world's largest coffee chain up more than 2% in early trading Wednesday. Cowen also raised its 12-month price target to $99 from $77 per share. "We expect shares to perk up as SBUX focuses on the right opportunities," Cowen analyst Andrew Charles told clients. "In our view, COVID-19 presents new efficiency opportunities for the Growth at Scale agenda to drive." Shares of Starbucks plummeted during the coronavirus market rout, as the nationwide shutdown caused the coffee chain to close its doors in the U.S. and China. Starbucks shares have clawed back nearly 70% from their March low as the chain reopens stores and adopts new strategies for improving performance, such as closing underperforming stores. "We view early signs of the U.S. recovery as durable, aided by broadening digital access through expanded pay options for loyalty and 23% of U.S. stores adding curbside pick-up," said Charles. He also said Starbucks' opportunities to refranchise markets outside of the U.S. and China would lead to a more asset-light future while enhancing Starbuck's long-term growth rate. The firm expects Starbucks' new strategies, coupled with strong capital allocation, to grow earnings by 15% between 2022 and 2023, following a "robust" bounce back in 2021. Cowen raised its 2020 earnings-per-share estimates to 98 cents from 97 cents, compared with consensus of 96 cents. The firm hiked its 2021 estimates to $2.91 from $2.79 per share, higher than consensus of $2.69. Cowen also upped its 2022 estimates to $3.30 per share from $3.09, higher than the consensus of $3.24. "We believe the stock should see a multiple boost from a more asset-light future as SBUX streamlines international operations outside of China and U.S.," Charles said. — with reporting from CNBC's Michael Bloom.

People wear protective face masks outside Starbucks in midtown as the city moves into Phase 2 of re-opening following restrictions imposed to curb the coronavirus pandemic on June 23, 2020 in New York City.

Noam Galai | Getty Images

(This story is for CNBC Pro subscribers only.)

The Covid-19 crisis is helping Starbucks reset its business strategy, shedding unneeded assets and focusing on customer innovation, according to Cowen.

The Wall Street firm upgraded shares of Starbucks to outperform from market perform, sending shares of the world's largest coffee chain up more than 2% in early trading Wednesday. Cowen also raised its 12-month price target to $99 from $77 per share.