Saturday, July 7, 2007

Another Mystifying Analyst Call: Starbucks

A Bear Stearns (BSC) analyst cut his price target on gourmet coffee retailer Starbucks (SBUX) Monday, saying it's still a good time to buy the stock, but the shares may not rise as quickly as he previously thought.

The analyst, Joseph Buckley lowered his price target to $35 from $47 and said recent cautious statements by company management indicate sales may be lower than the company's own expectations with higher dairy costs pressuring margins. Where have we heard that one before? Another thing, how can you drop your "price target" 25% and still go out and tell people to buy shares? Isn't there some Hippocratic oath these guy have to take? Something like "don't blow smoke up people's a**" or is it more like "stick some lipstick on that pig"?

Investors, he added, may focus on those negative aspects rather than sales growth, lowering the chance that its Aug. 1 earnings release will serve as a catalyst for the stock. That and the fact they may actually miss those estimates and, when can I ask did sales growth become more important than earnings? Are we flashing back to 1999?

"Overall market sentiment seems very focused on the near-term negatives and ill-focused on this company's strengths and growth prospects," he said. "This, in our view, is a more appropriate time to buy than sell." But just do not expect to make very much. The very fact they do this "price target" game is a joke. Nobody knows what shares will trade at a year from now, why bother telling people?

Really you just cannot make this stuff up..

Are Starbucks shares a "value" now? No, but they are getting close. If they miss earnings this quarter or guide lower for the future, shares will get creamed and they just may hit the $22 price I would be willing to pay.... just might.

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