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FINANCIALS

Deutsche Bank AG (USA) (DB) downgrades Starbucks Corporation (SBUX) to put a leash on wild near term expectations

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SBUX remains well positioned and the long term strategy favors growth, however, premium valuation makes the stock risky

Starbucks Corporation (NASDAQ:SBUX) has been downgraded at Deutsche Bank as potential for upside remains little and the premium valuation makes the risk reward profile tip a little on the wrong side. The analyst has declared a cautious stance in response to premium valuation and lofty expectations.

Analyst Brett Levy believes that SBUX stock is very well position for the long term and their strategy is likely to stimulate further growth. The company has a made point to use technology and innovations as a means to harness growth and a well-defined execution plan to go with it. Despite the positives, the investor expectations might be a little too much to provide for in the short term and will lead to disappointment. The analyst, however, remains largely impressed by SBUX and believes that the stock will achieve industry leading growth in same store sales and profits. Despite accounting for such humongous growth potential, the analyst believes that the share prices are way too high and some downside maybe likely given investor disappointment in the short term.

Mr. Levy concluded his remarks with the comment that the current price is quite a fair estimate and thus the hold rating makes much more sense given the absence of a massive upside that could exceed expectations in a flashy manner. Revenue growth has been rather solid and driver profitability growth over the past financial periods. The analyst advises investors to look for better alternatives for the time being. The price target was cut to $64 from $70, while, the general analyst opinion for SBUX is 13 strong Buy, 11 Buy and four Hold ratings. The stock is currently traded at $59.65 in the premarket.

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