Goldman Sachs backs Starbucks with 'conviction'


Goldman Sachs keeps Starbucks (SBUX -0.7%) on its Conviction Buy List on its view that earning growth will turn the company into a $100B market cap flyer in three years.

A combination of coffee deflation and fixed cost leverage could help the company achieve whopping margin expansion of 400 bps - 500 bps, says Goldman.

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Comments (6)
  • nickkoto
    , contributor
    Comments (91) | Send Message
     
    And just like that, a $2/share sell-off vanishes.
    31 Oct 2013, 11:34 AM Reply Like
  • civ-e
    , contributor
    Comments (681) | Send Message
     
    100B would put it in the same league as PEP and KO. will be exciting to watch this unfold.
    31 Oct 2013, 02:46 PM Reply Like
  • BuyToSell
    , contributor
    Comments (471) | Send Message
     
    Bought last night on the post call dip. Happy today ;)
    31 Oct 2013, 04:05 PM Reply Like
  • BAHAMAS1
    , contributor
    Comments (5119) | Send Message
     
    In a way, SBUX is a modern version of fast food & drink with a Barnes & Noble sophisticated reading ambiance.
    What I like about that is that you have to Buy something to use the ambiance !
    31 Oct 2013, 10:49 PM Reply Like
  • tom g
    , contributor
    Comments (84) | Send Message
     
    Between expanding the growing coffee business in China as well as the Teavana purchase, China total sales will probably surpass Canada prior to the two year forcast
    1 Nov 2013, 01:08 PM Reply Like
  • Bird-man
    , contributor
    Comments (1162) | Send Message
     
    Goldman is wrong. They have predicated earnings growth on exactly the weak link in the machine. The article notes that confidence exists because commodity prices have declined. What is implicit in this assumption is that Starbucks revenues will remain stable and not decline in sympathy with lower costs and therefore the differential between input costs and sales will hold up (even expand) the revenue base. Where they are making their mistake is in assuming no competitive forces will arise due to lower priced inputs that might pressure the company to modify its price structure. Almost ALL commodities are now in decline. Can we make the same case for each and every company that buys them? I don't think so. We are more likely to see prices drop if consumption patterns don't improve and therefore it is my conclusion Starbucks will lower prices on beverages bringing them more in line with the reality of their substantially lowered cosst input structure. If they want to survive the next recession that is.
    5 Nov 2013, 07:46 AM Reply Like
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