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Most Analysts Still Rate Starbucks a ‘Buy’ after 1Q16 Earnings

Good News and Warm Brews: Starbucks's 1Q16 Margins Expand

(Continued from Prior Part)

Analysts’ ratings

Starbucks (SBUX) closed at $59.20 on January 22. Following the 1Q16 earnings release, we saw an update on future developments that may reflect in the company’s share price. Let’s look at analysts’ ratings and price targets for Starbucks’s share price over the next 12 months.

Analysts’ price target and ratings

As of January 22, Wall Street analysts have a price target of $68.50 for the next 12 months for Starbucks. This target rose slightly from $68.30 before the company’s 1Q16 earnings announcement—15.7% upside from the company’s share price of $59.20.

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Now let’s look at analysts’ ratings for Starbucks. About 79% of analysts still have “buy” recommendations for Starbucks. Meanwhile, 21% have “hold” recommendations and none have “sell” recommendations, according to Bloomberg Consensus, which surveyed 28 analysts. Overall, the stock has a “buy” rating. Over the years, we’ve seen Starbucks’s share price move in tandem with analysts’ recommendations. When analysts raised their next-12-month price targets, the stock price also increased, and vice versa.

But Starbucks’s stock price, which is trading below analysts’ consensus target price, doesn’t necessarily mean the company is a “buy.” You have to be careful to also look at where the company’s valuation multiples are trading, which we discussed earlier in this series.

You can also access Starbucks through the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY has 3% exposure to Starbucks (SBUX), 4% to McDonald’s (MCD), 1% to Chipotle Mexican Grill (CMG), and 1.5% to Yum! Brands (YUM).

For more restaurant updates, you can visit Market Realist’s Restaurants page.

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