What is Driving Starbucks Analyst Upgrade?

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By Jacob Maslow

Kuala Lumpur Starbucks store interior
Interior of a Starbucks Store in Malaysia

Starbucks (NASDAQ:SBUX) has been on a positive streak recently. Its first-quarter earnings report was in line with analysts’ estimates. The famous and ubiquitous coffee company did not disappoint analysts who are tracking its business. In fact, based on its first quarter results as well as its outlook for the rest of the year, many financial firms have been upgrading or maintaining their positive recommendation for Starbucks.

It seems like there’s a large chorus of companies that are recommending investors to buy into this coffee company. What gives? There’s a lot to recommend about Starbucks. First, its projected sales are built on solid ground. After all, Starbucks opened 512 new stores and the same-store transactions increased by 12M on a global basis. There’s definitely room for growth in the future. A lot of the optimism regarding Starbucks revolves around the company’s push for international growth, saving costs, and management and operational innovation. This all sounds well and good and it seems that there’s a growing chorus of positive boosters for this stock. Obviously, Starbucks is also being helped by the decrease in overall commodity prices.

The open question is whether the increasingly global slowdown will put a crimp on Starbucks’ international expansion plans as well as its same-store earnings. It’s worth noting that Starbucks has suffered major reverses in its American market when the overall US economy suffered a decline starting in 2008. This might happen again but in reverse. The action might not involve the United States, which is enjoying a pretty decent recovery, but overseas. While the optimism seems to be based on solid numbers, there are still a lot of open questions regarding Starbucks’ short to mid-term prospects.


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