On Monday, BofA Securities maintained a positive outlook on Starbucks Corporation (NASDAQ:SBUX), reiterating its Buy rating and a price target of $117.00. The affirmation follows an in-depth sum of the parts (SOTP) analysis conducted by the firm's analyst.
"Given that Starbucks has multiple business segments with distinct characteristics, we conduct an SOTP analysis. This is different and separate to the valuation we use to derive our $117 PO: to derive the latter we use a target P/E multiple relative to the equal-weight S&P 500," analysts at BofA said in their note.
The report highlights that Starbucks North America segment is a significant contributor, with company-operated stores accounting for 67% of revenue and 58% of EBITDA, while licensed stores contribute 8% of revenue and 16% of EBITDA. These licensed stores are often located in high-traffic captive real estate locations, including transit hubs and retailers such as Target (NYSE:TGT) and Kroger (NYSE:KR).
Additionally, the international segment of Starbucks is dissected to identify the performance of operated stores, which make up 15% of revenue and 9% of EBITDA, and licensed stores, contributing 5% of revenue and 6% of EBITDA. The analysis further distinguishes China's performance within the operated business, setting it apart from other markets like Japan and the UK.
The Channel Development segment, which includes partnerships such as Nestle (NS:NEST) licensing and a joint venture with Pepsi, is also noted for its contribution to the company's financials, representing 5% of revenue and 11% of EBITDA.
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