At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
Like the aroma from a freshly brewed cup o' joe, optimism wafted through the markets this week as UBS upgraded shares of Starbucks (Nasdaq: SBUX) to "buy" on Tuesday. Although concerned that the firm's VIA instant coffee gambit may lose its perk, and worried too that competition from McDonald's (NYSE: MCD) and rising commodity costs may combine to compress margins, UBS is nonetheless bullish on the shares, arguing that Starbucks has "enough momentum" to justify buying at today's prices.

I agree.

Let's go to the tape
UBS has historically been best known as an "energy analyst," whose success in the markets owes largely to a series of prescient picks on companies such as Alpha Natural Resources (NYSE: ANR), Occidental Petroleum (NYSE: OXY), and ExxonMobil (NYSE: XOM) back in 2007 and 2008. And yet, UBS is no slouch in Starbucks' home field of Hotels, Restaurants and Leisure stocks, either:


UBS Says:

CAPS Says:

UBS's Picks Beating S&P By:




66 points

YUM! Brands (NYSE: YUM)



57 points (four picks)

Wendy's/Arby's (NYSE: WEN)



3 points

In fact, with nearly 56% of its picks in this sector outperforming the market, you could argue that UBS is actually a better restaurant critic than oil wildcatter. (Indeed, within the energy field, UBS actually only guesses right about 50% of the time.)

So strange as it sounds to hear myself saying it, UBS just might be onto something when it tells us that the real growth driver at Starbucks could be ... instant coffee. According to UBS, VIA has become "a popular add-on item" for customers, helping to boost sales and explaining why Starbucks -- the company reputed to have grown so big that it now needs to open new Starbucks' locations within existing Starbuckses -- has plenty of growth still ahead of it.

Try it. You'll like it!
How might this be possible? Personally, I've tried VIA and found it to be ... well, instant coffee. No better or worse than similar offerings from, say, Taster's Choice.

But to each his own. My reservations notwithstanding, UBS tells us that "a significant percentage of customers that sample Starbucks VIA become repeat purchasers, often switching up to the 12-pack size." Using its international perspective to full advantage, UBS urges investors to consider the possibilities as VIA rolls out beyond U.S. borders and claims its share of the "$12 billion instant coffee market outside North America."

In part by virtue of VIA, UBS believes Starbucks will outpace consensus expectations this year and earn $1.14 per share. Assuming it's right about VIA, and that McCafe, commodities costs, and momentum worries don't upset the coffee cart too soon, this suggests that Starbucks could go on to exceed longer-term expectations for 15.7% annualized profit growth as well.

Buy the numbers
But here's the great news: Even if UBS is wrong about VIA and wrong about Starbucks exceeding expectations, I still think the shares look fairly priced today, limiting the downside in the event this analyst proves overoptimistic.

Priced at just 17 times trailing earnings and 16.4 times trailing free cash flow, shares of the coffee czar appear fairly priced relative to consensus growth estimates. When you consider too the value of the Starbucks brand name -- the dominance of this franchise, and the large moat separating Starbucks from any of its would-be koffeeklatsch competitors -- I believe investors today are being offered a chance to buy the proverbial "great company" at the also-proverbial "good price" that Warren Buffett is always talking about.

My advice: Don't be a teetotaler. Follow your nose. UBS has sniffed out a bargain at Starbucks.

Starbucks is a Motley Fool Stock Advisor pick.

Fool contributor Rich Smith has no position in any of the stocks named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 647 out of more than 160,000 members. The Motley Fool has a disclosure policy.