Monday, June 11, 2007

Deutsche Bank on Mcdonald's (MCD) and Starbucks (SBUX), Where Ya' Been?

Upgrading it's rating on McDonald's (MCD) shares to "buy" from "hold," and bumping it's price target to $61 from $45 (20%) saying the company "is poised to capitalize on global economic growth and key consumer trends in the United States", Deutsche Bank enlightened clients to the obvious in a note Friday. Yeah. If I was a "client" I would be asking, "You are just only getting this now?"

Just in case "clients" were not mystified enough, the firm cut its price target on Starbucks Corp. (SBUX) shares to $32 from $37, saying "The downside of McDonald's getting coffee right is material to both same-store sales and the global growth opportunity," they said. "We see several obstacles to higher returns and valuation for Starbucks."

The timing of this for investors is nice as Starbucks shares now sit at multi-year lows and McDonald's sits at multi-year highs.

"McDonald's sits at the crux of key positive trends in the U.S. restaurant industry, including Quick Service Restaurant resurgence, an expanding beverages opportunity, and a health/wellness slant (with a focus on women and kids), Deutsche Bank said. No kidding!?!

I have been stumping this very line of thinking since January here, here and here and other times but I think you get the point. In the meantime Starbucks shares have fallen over 20% to levels not seen since October 2005 (they will fall further) and McDonald's shares are up by some 20%. If you are a Deutsche Bank client, you may want to be asking them what happened.

Apparently the only person who is farther behind the curve here is Starbucks CEO Jim Donald

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