Goldman upgrades Starbucks Corp. (SBUX ) to outperform.
Analyst Steven Kron upgrades from in-line on solid second-quarter, higher margins. Given a share decline of 25% year-to-date due mostly to investor concerns about decelerating same-store sales, he believes sentiment will now shift more favorably and momentum will drive shares higher through the rest of 2005 to his fair value of $55 to $57 per share.
He says the upgrade considers a strong top-line driven by 7%+ same-store sales through the rest of 2005, 18% unit growth, stable earnings per share growth of 20%+ for the next 3 to 5 years, and significant cash flow.
Kron raises his fiscal 2005 (ending September) and fiscal 2006 earnings per share estimates to $1.19 and $1.44, respectively.