In the past year, Starbucks Corporation (ticker: SBUX) shares are up only 8.2 percent, well short of the 17.4 percent gain of the overall Standard & Poors 500 index. Starbucks investors are not used to lagging the market, but they may not have to wait much longer for the stock to return to its winning ways.
Deutsche Bank this week upgraded SBUX stock from “hold” to “buy.” Analyst Brett Levy said that Starbucks’ painful refocusing period is drawing to a close, and the company has made all the right moves to ensure major growth for years down the road.
According to Deutsche Bank, Starbucks stock will likely remain highly correlated with the company’s same-store sales growth.
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In the past year, Starbucks has heavily invested in developing and marketing its rewards loyalty program, mobile ordering platform and food menu options. Levy reports that Starbucks is already gaining traction with all three initiatives.
The company’s “My Starbucks Rewards” program now has 13.3 million members, up about 11 percent in the most recent quarter. Spending per active user was also up 8 percent.
In addition, mobile orders and payments have grown to more than 20 percent of the company’s total peak-hours transactions. Food now makes up about 21 percent of overall sales.
While Starbucks stock is certainly not cheap, Levy noted that it has been trading slightly below its 10-year average forward price-earnings premium relative to the S&P 500.
“Starbucks remains a standout operator and performer that should separate itself from its peers through ongoing menu innovation, its technology initiatives and a focusing on the in-store experience,” Levy wrote.
[See: 7 of the Best Stocks to Buy for 2017.]
In addition to the upgrade, Deutsche Bank has raised its price target for Starbucks stock from $59 to $69.
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Starbucks Corporation (SBUX) Is Making All the Right Moves originally appeared on usnews.com
