How Much More Can Starbucks Shares Rise?

June 11, 2015 by 247chrislange

Starbucks Corp. (NASDAQ: SBUX) has moved very quietly since its stock split back in April, and this may have lulled some investors and analysts alike to sleep on it. Still, shares are up 10% since that split went into effect. “Speak softly and carry a big stick” seems to be the motto for this giant. The company has taken care of its employees with wage hikes and has done well against its competition. This has afforded Starbucks multiple opportunities for both near-term and long-term growth.

Recently the company announced sweeping changes for its employees. First Starbucks said that it will increase wages for its baristas and shift supervisors. More recently the company stated that it would fund tuition for its “partners” in a joint venture with Arizona State University. This is a monumental move by the coffee giant, signaling how much it values its employees. Granted this will take away from some of its earnings, but in return Starbucks will gain loyal, experienced employees who should tend to leave less and further strengthen its leadership and corporate structure over the long term.

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Ultimately Starbucks is looking to pave the way ahead through these initiatives, allowing for more long-term growth opportunities. Other companies like McDonald’s Corp. (NYSE: MCD) and Wal-Mart Stores Inc. (NYSE: WMT) have taken cues from Starbucks and are pursuing similar initiatives.

Starbucks is also looking to expand internationally into Japan, taking over Starbucks Japan just this past fall. This provides the opportunity for some very real near-term growth. Other growth opportunities in the near future were discussed at its investor day back in December, when the coffee giant forecast that it could nearly double revenues in five years.

Now, the stock has a consensus analyst price target of $55.00, which implies upside of 4.7% from current prices, before considering its dividend yield of 1.2%. Some 26 brokers weighed in for this consensus. The highest price target was $60, implying upside of 14.2%, and the lowest price target was $43, implying downside of 18.2%.
A few of the most recent analyst calls were as follows:

  • Deutsche Bank initiated coverage with a Buy rating and a $60 price target (tied for highest).
  • Citigroup has a Buy rating and increased its price target to $60 from $50.50.
  • Argus has a Buy rating and raised its price target to $59 from $54.

On Thursday morning, shares of Starbucks were down about 0.1% to $52.64, within its 52-week trading range of $35.39 to $53.00. Again, since the most recent stock split shares have gained roughly 10%.

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Despite being down on the day, shares opened higher and made a very quiet move, hitting a new all-time high. The range on the day as of noon Eastern Time was $52.46 to $53.00. Starbucks has the potential to grow a lot more in the coming years, but are analysts seeing the full picture? After all, the analysts seem to keep raising their price targets on Starbucks every few months.