UPDATE 1-RESEARCH ALERT-BofA upgrades Starbucks to neutral

martedì 8 gennaio 2008 16:03

(Changes source, adds analyst's comments and share movement)

Jan 8 (Reuters) - Banc of America upgraded Starbucks Corp (SBUX.O: Quotazione) to "neutral" from "sell," a day after the coffee house chain replaced Chief Executive Jim Donald with founder and chairman Howard Schultz and said it would slow an aggressive U.S. expansion.

"We believe that the beginning of a strategic shift to slow U.S. growth and return cash to shareholders could be well received," analyst Andrew Barish wrote in a note to clients.

Barish said shares of the company, which were up more than 10 percent at $20.27 in early trade on the Nasdaq, would likely benefit from these continued strategic shifts.

The world's biggest coffee chain, which has been dogged by concerns about slowing U.S. sales growth, soaring dairy prices and competition from fast-food rivals such as McDonald's Corp (MCD.N: Quotazione), is also planning to accelerate its expansion abroad in an effort to reinvigorate the brand.

Barish said though Starbucks controlled a strong brand and had the potential to grow, a recovery would take some time as the international business was still too small to make significant contributions to operating margins.

He has a price target of $20 on the stock.

On Monday, Schultz, who was Starbucks CEO from 1987 to 2000, said the company would close underperforming U.S. outlets.

Investors have nearly halved Starbuck's value to $13 billion in the last year in the midst of weakened U.S. sales growth. (Reporting by Tenzin Pema in Bangalore; Editing by Amitha Rajan)