Starbucks Set to Gain from China’s Reopening, Target Increased at BofA

Analysts at BofA Securities have increased their price target for Starbucks Corporation to $125, up from $109, while maintaining a “Buy” rating on the stock. This adjustment is attributed to favorable conditions stemming from the reopening of the Chinese economy.

In their recent assessment of the well-known coffee chain, the analysts believe Starbucks is well-positioned to gain from China’s long-anticipated economic rebound, particularly as the country has moved away from its stringent zero-COVID policy.

Despite some uncertainty regarding the timing of this economic boost due to ongoing financial difficulties and widespread COVID-19 outbreaks, the analysts project that China will recover to approximately 60-70% of normalized levels by 2023, which could positively impact the company’s earnings.

BofA Securities also highlights that the challenges faced in recent years, including temporary issues in China and pressure on margins within the U.S., have created a “particularly attractive buying opportunity” for investors.

As a result, the analysts have raised their price target and reiterated their “Buy” recommendation. Following this news, shares of Starbucks are showing a 1% increase in pre-market trading on the first trading day of the year, after experiencing a nearly 15% decline in 2022.