Starbucks "buy," target price reduced - update

16.11.07 - UBS

NEW YORK, November 16 (newratings.com) - Analysts at UBS maintain their "buy" rating on Starbucks (SBUX), while reducing their estimates for the company. The target price has been reduced from $38 to $37.

In a research note published this morning, the analysts mention that the company is expected to post lower-than-anticipated earnings in F1Q due to the ongoing weakness in traffic in the US, higher-than-expected dairy cost pressure and reinvestment in marketing. Starbucks is likely to reduce its US store growth, which together with the improvement in dairy costs would lead to accelerated free cash flows and EPS growth going forward, the analysts say. The EPS estimate for FY08 has been reduced from $1.07 to $1.05.