Boys, you should pick up the paper once in awile. It got the Barron's Bounce" over the weekend, along with AAPL and a few others.
NEW YORK, March 25 (Reuters) - The price of Starbucks Corp. (SBUX.O: Quote, Profile , Research) shares could rise to the mid-$40s over the next 12 months, Barron's reported Sunday, citing analysts and investors who believe the coffee house giant is still steaming ahead.
Starbucks stock had fallen 20 percent from its November high of 40 amid concerns about profit margins, market share and long-term growth, Barron's wrote. Shares rallied 3 percent last week, closing Friday trade at $31.42, after executives told shareholders they don't see the company's earnings growth slowing.
Some investors and analysts say the sell-off provides an opportunity to scoop up shares not seen since late 2004, the weekly financial magazine said.
The stock still trades at a lofty 36 times expected fiscal 2007 earnings, expensive compared with McDonald's (MCD.N: Quote, Profile , Research) and the broader stock market. Sell-side analysts who follow the company, meanwhile, are split on the stock: half rate it "buy" and the remainder rate it a "hold" or "sell."
Still, bulls like Deutsche Bank analyst Marc Greenberg cite the coffee chain's brand, pricing power and operating model as reasons to buy. Goldman Sachs' Steven Kron set a price target of $43 for the shares, Barron's said.
The magazine also said two unidentified money managers are buying up the stock.
Skeptics, though, question whether the company can continue to expand its worldwide chain of 13,168 stores. Starbucks plans to open 1,600 stores in the current fiscal year, followed by 2,000 to 3,000 in fiscal 2008.
Barron's said some U.S. states "look underserved," while there are opportunities to expand in China, Brazil, Russia and India. The company is also working to boost the value of each sale by also promoting beans, pastries and music.
That said, same store sales have slipped and profit margins have been squeezed over the past year. Fiscal third-quarter results could be encouraging, since they will be compared with weak year-earlier figures, Barron's wrote.