Oppenheimer Reiterates Outperform On Starbucks Ahead Of Q1 Results

Oppenheimer recently wrote a report on Starbucks Corporation (NASDAQ: SBUX) ahead of the company's 1Q16 earnings results, scheduled to be released on Thursday. Oppenheimer reiterated its Outperform rating for Starbucks while giving the coffee company a $65 price target.

Analysts Brian Bittner and Michael Tamas wrote, "Successful roll-out of mobile order/pay has allowed management to confidently raise '16 comp guidance above normalized "mid-single-digit" range. While stepped-up employee/technology investments could limit EPS flow-through, earnings could still grow 18-20 percent."

Oppenheimer highlighted two key points on why they see strength in Starbucks:

1. Strong Business Operations

Analysts expect an 8 percent same-store sales growth for Starbuck's domestic segment in the first quarter, which points to strong and efficient use of its stores to drive top line growth. Furthermore, Starbucks has the opportunity to further drive unit growth of its products in 2016 as traffic in the stores and demand for its offerings remain strong.

2. Margin Expansion

Analysts at Oppenheimer noted that Starbucks has the potential to expand operating margins by up to 100 bps due to cost savings and top line revenue growth. Furthermore, as Starbucks has shown the ability to react well to changing consumer demands with special holiday product offerings, the company continues to gain customer satisfaction.