Shares of Starbucks (SBUX) are higher by 77 cents, or 3.2%, at $25.19, after UBS Securities analyst David Palmer this morning raised his rating on the stock to “Buy” from “Neutral” and raised his price target from $27 to $29, and raised his earnings estimates for this year, writing that the company is headed for above-average earnings growth over the next two years.
The core business will take care of itself in a cyclical recovery, writes Palmer, but the upside, believe it or not, could come from “VIA,” the company’s instant coffee packets that it sells near the cash register.
The product appears to have been “a popular add-on item,” writes Palmer. Starbucks’s consumer research, he writes, shows “a significant percentage of customers that sample Starbucks VIA become repeat purchasers, often switching up to the 12-pack size.”
VIA is aiming at a $12 billion instant coffee market oustide North America as the “true prize,” writes Palmer.
Palmer raised his EPS estimate for this fiscal year ending September to $1.09 to $1.14, above the company’s own forecast of as much as $1.08, and above the $1.11 average estimate of analysts.
Personally, I’ve not tried VIA, nor been tempted. Any impressions from drinkers out there?
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