AnalystConsensusTarget updated the narrative for SBUX

Starbucks' analyst price target has been lowered by approximately $1 to $96.60. Analysts cite ongoing challenges in sales trends, profit margins, and execution against strategic initiatives.

Analyst Commentary

Recent analyst research on Starbucks highlights a complex outlook characterized by both encouraging strategic moves and ongoing operational challenges. Price targets have been adjusted downward by several firms, reflecting uncertainty about near-term growth and profitability. However, optimism remains for aspects of the turnaround and longer-term potential.

Bullish Takeaways

• Bullish analysts note that Starbucks' ongoing portfolio restructuring and cost reductions are tracking in line with expectations, even as the process takes longer than initially anticipated.
• Investors are encouraged by management's accelerated rollout of new service initiatives, such as the Green Apron model, which could positively impact customer traffic trends sooner than previously expected.
• There is confidence in the leadership team and the strategies being implemented across operations, marketing, and product innovation, supporting a gradual recovery in sales over time.
• Improved service and the popularity of new menu items have aided recent U.S. performance, signaling potential for further positive trends if execution continues to improve.

Bearish Takeaways

• Bearish analysts remain concerned about persistent pressures on profit margins and earnings, which may weigh on Starbucks’ valuation in the near term.
• There are lingering doubts about the pace of progress with the “Back to Starbucks” strategic initiatives, and whether they can overcome industry headwinds quickly enough.
• Store closures and reductions in corporate staff, while in line with expectations, underline the operational challenges and need for further restructuring.
• Some research points to a “messy” backdrop heading into earnings. Disruptions from store closures and weakening industry demand could affect sales visibility and sentiment.

What's in the News

• Long-term Starbucks investors have urged the company to restart negotiations with its workers' union, seeking progress on staffing, wages, and other labor issues (Reuters).
• Starbucks CTO Deb Hall Lefevre resigned from her position. Ningyu Chen has been named as interim CTO while the search for a permanent replacement is ongoing (Reuters).
• CEO Brian Niccol is focused on delivering drinks more quickly and accurately to enhance the customer experience. The company acknowledges that bringing customers back will take time (The New York Times).
• The launch of Starbucks’ fall product lineup resulted in a record-breaking sales week across US stores and Canada, according to an internal company message (Bloomberg).
• Five Starbucks plants in the US will cut two days of weekly production to a five-day schedule, as part of ongoing cost-saving efforts and adjustments to demand (Bloomberg).

Valuation Changes

• Consensus Analyst Price Target has decreased modestly from $97.63 to $96.60, reflecting lower near-term expectations.
• Discount Rate has edged down slightly from 9.14% to 9.09%, indicating a marginal decrease in perceived risk.
• Revenue Growth estimates have been revised downward from 6.74% to 6.35%, suggesting analysts expect slower future expansion.
• Net Profit Margin projections have ticked down from 10.01% to 9.74%, implying slightly reduced profitability expectations.
• Future P/E ratio has risen from 32.54x to 33.39x. This signals a higher valuation relative to forecasted earnings despite moderating growth and margin estimates.