Starbucks Corporation (SBUX) shares rose nearly 2% during Thursday's session after JPMorgan upgraded the stock from Neutral to Overweight with a $94.00 per share price target – a 6.6% premium to Thursday's closing price.
Analyst John Ivankoe believes that the coffee chain's "Grow at Scale" agenda is meeting or exceeding sales and margin objectives in the near and medium term after meeting with the CEO and CFO at the company's headquarters. While he didn't formally update his model, Ivankoe projects that U.S. comps will rise 5% and that results in China are at least within 1% to 3% of expectations.
"We believe numerous sales drivers including beverage-led comp growth, U.S. and China unit development, the global coffee alliance and operations initiatives are matched with meeting if not exceeding set sales and margin objectives, allowing the stock to sustain a premium multiple," wrote Ivankoe.
From a technical standpoint, the stock broke out from reaction highs to its highest levels since September. The relative strength index (RSI) rose toward overbought levels with a reading of 66.77, but the moving average convergence divergence (MACD) broke through the zero line. These indicators suggest that the stock could see some near-term consolidation before continuing its move higher over the coming weeks.
Traders should watch for some consolidation above trendline support at $87.00 over the coming sessions. If these levels hold, the stock could resume its upward trend toward reaction highs near $92.00. If the stock breaks down from these levels, traders could see a move lower toward the 50-day moving average at $84.31 or trendline support near the 200-day moving average at $83.25, although the bull case seems more likely.
The author holds no position in the stock(s) mentioned except through passively managed index funds.