Starbucks rallies after JPMorgan turns bullish on China potential
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JPMorgan upgraded Starbucks Corporation (NASDAQ:SBUX) to an Overweight rating from Neutral on its view the near-term headwinds will fade for the global coffee chain operator.
Analyst John Ivankoe said getting the timing right of Chinaâs domestic policy is difficult, but believes COVID-era restrictions will be sorted out over time as it has nearly everywhere else in the world.
Ivankoe and team also weighed in on SBUX's pricing power as they turned constructive on the setup for shares to recover.
"Taking price to an increasingly broad and frequent customer base always poses a risk, but the brand should still maintain its 'affordable luxury' status. Starbucks is the single most difficult (and tempting) stock call in our coverage. Valuation supports 'more upside than downside,' even on lower numbers, and while the catalyst for near-term movement is elusive, investors should allow for mean-reversion and valuation in itself to drive stock outperformance."
JPMorgan assigned a December 2022 price target of $101 to Starbucks (SBUX).
Shares of Starbucks rose 3.04% in premarket trading to $85.65. Positive news out from China's central bank on keeping capital markets stable is helping to boost overall sentiment on China-related stocks.