Starbucks Corp. (SBUX) has accelerated fiscal fourth-quarter same-store sales growth thanks to increasing demand for breakfast snacks and higher-priced coffee. That's the conclusion of a UBS analyst, who today raised his stock price-target for the company's stock.
UBS analyst David Palmer estimated same-store sales for the fiscal-fourth quarter, which ended last month, increased 7% -- up from Palmer's prior estimate of 6%, as Starbucks likely boosted sales of new flavored coffee drinks. Starbucks will report fiscal fourth-quarter earnings Nov. 4.
With higher-than-expected sales, UBS's Palmer increased Starbucks' price target to $31 a share from $29 a share and maintained his "buy" rating on the stock. Starbucks shares rose 0.6% to $27.43 in NASDAQ trading today.
The company's sales growth "would be against new competition from frappes and smoothies at McDonald's, proving yet again the potential for coffee category growth," wrote Palmer. "Like McDonald's, Starbucks has continued to invest in advertising and innovation through the downturn, creating compelling reasons for consumers to use their brand."
Starbucks said last month that it would raise prices of some of its larger and more labor-intensive beverages in response to surging prices of green Arabica coffee beans. Starbucks said in August that rising commodity prices would force the company to absorb 4 cents a share for fiscal 2011.
Starbucks' fiscal third-quarter profit jumped 37% as same-store sales rose 9%.