Starbucks’ (SBUX) cost levers could help the company deliver on earnings growth and likely get more management focus, Morgan Stanley said Tuesday.
The brokerage upgraded its rating on the coffee chain’s stock to overweight from equal-weight and raised its price target to $120 from $112.
“While US sales slowing is a legitimate concern, available product, tech, store levers remain interesting, in our view, and discounted somewhat by the market,” Morgan Stanley said in a note. The firm said it expects China headwinds to persist for the time being, but are likely fully priced in.
“[Starbucks] is one of few companies we cover we’d consider to still be under-earning vs its potential, and it has a history of working its way out of tough spots,” Morgan Stanley said.
For 2024, the firm expects Starbucks’ per-share earnings of $4.05, compared with the market consensus for $4.14, according to the note.