• by Karlene Lukovitz  @KLmarketdaily, January 5, 2017

While Starbucks hasn’t been totally immune to declining traffic trends slowing the growth of the restaurant industry as a whole, one analyst says it is positioned to surpass McDonald’s in market value and also become the world leader in locations within the next several years.

“We believe it is only a matter of time before Starbucks overtakes McDonald's as the largest market cap restaurant stock, although likely not in 2017," wrote Nomura analyst Mark Kalinowski in a report issued on Tuesday, in which he picked Starbucks as top restaurant stock for the year ahead. Bloomberg first reported on the analysis.

Starbucks’ current market value is approximately $79 billion, versus McDonald’s’ $98.5 billion.

In its 2016 fiscal year ended October 2, Starbucks bounced back from a notably poor third quarter, in which global comp-store sales grew just 4%, reflecting a tough quarter in the U.S. But the company ended the year with record results -- including global sales growth of 11.2%, to $21.3 billion -- and global comps growth of 5%, including 6% growth in the U.S. It also saw 4% growth in earnings per share, to $1.90.

However, per Bloomberg, Starbucks’ stock price declined 7.5% last year due to investor concerns about slowing growth and concern about Howard Schultz stepping down from CEO in April 2017 to focus on global innovation and growth, including the high-end Starbucks Reserve Roasteries, as executive chairman.

Kalinowski projects that Starbucks’ same-store sales will grow by more than 5% in 2017, and its global restaurant count by 8.4%.

For fiscal 2017, Starbucks’ guidance calls for double-digit revenue growth, mid-single-digit comp-store sales growth, and EPS in the $2.09 to $2.11 range.

Starbucks’ five-year strategic plan, updated at an investor conference in early December, calls for revenue growth of 10%, EPS growth of 15% to 20%, and mid-single-digit comp-store sales growth each year. 

Starbucks currently has approximately 25,000 locations globally. It added 2,043 net new stores globally in fiscal 2016, expects to open 2,100 net new stores in fiscal 2017, and projects adding 12,000 new stores globally by 2021, to bring its total to 37,000.

Kalinowski forecasts that Starbucks will not only meet that growth goal but “well beyond 2021, we would not be surprised to see Starbucks exceed the 50,000-store level.”

McDonald’s had about 36,615 global locations as of September 2016, and Subway, the world leader, had more than 44,000 as of 2016 (44,700, according to Statista). 

Kalinowski cited Starbucks’ premium Reserve brand, which could eventually generate $3 billion in annual sales, as well as the company’s advantage of being primarily driven by beverages rather than food, as core reasons that it will thrive in the years ahead.