Starbucks "market outperform," target price reduced

03.08.07 - JMP Securities

NEW YORK, August 3 (newratings.com) - Analysts at JMP Securities reiterate their "market outperform" rating on Starbucks Corporation (SBUX), while reducing their estimates for the company. The target price has been reduced from $45 to $35.

In a research note published yesterday, the analysts mention that the company has reported its F3Q07 EPS short of the estimates and in-line with the consensus. Starbucks has issued its EPS growth guidance for FY08 at 20%-22%, equating to EPS of $1.04-$1.09. The company?s gross margins are likely to contract by 160 bps this year due to increased dairy and energy costs, the analysts say. The company plans to open 2,600 stores in FY08, representing around 18% unit growth as compared to the 20% in FY07. The downward revision in the target price also reflects an adjustment in the DCF model, JMP Securities adds. The EPS estimates for FY07 and FY08 have been reduced from $0.89 to $0.88 and from $1.09 to $1.07, respectively.