How Starbucks’ (SBUX) AI and Menu Innovation Are Reshaping Its Investment Story

• Starbucks recently unveiled new protein-packed cold foam beverages and lattes, launched AI-based inventory management tools, and reported its best-ever U.S. sales week after the fall drink rollout, as the company continues to modernize operations and menu offerings.
• At the same time, intensifying competition, especially from Luckin Coffee in China and New York, along with rising supplier costs and ongoing unionization efforts, is challenging Starbucks as it seeks to balance innovation with profitability.
• We'll explore how Starbucks' roll-out of AI-driven inventory management could influence the company's operational performance and overall investment narrative.

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Starbucks Investment Narrative Recap

To be a shareholder of Starbucks today, you need to believe in the company’s ability to reignite consistent earnings growth despite contracting profit margins and rising competition in its core markets. While the recent best-ever U.S. sales week and new protein-packed beverages underscore the power of menu innovation, they did not materially improve the most pressing short-term risk: pressure on operating margins from higher labor and supplier costs.

Among the latest announcements, Starbucks’ launch of AI-based inventory management tools stands out as particularly relevant. Faster, more accurate inventory processing is expected to support store-level efficiency, a key consideration as Starbucks seeks to offset cost pressures and stabilize profitability during this transitional period.

However, looming in the background is the increased squeeze on profitability from both rising labor costs and supplier expenses, information investors should not overlook as...

Read the full narrative on Starbucks (it's free!)

Starbucks' narrative projects $45.5 billion revenue and $4.6 billion earnings by 2028. This requires 7.5% yearly revenue growth and a $2.0 billion earnings increase from $2.6 billion today.

Uncover how Starbucks' forecasts yield a $99.38 fair value, a 16% upside to its current price.

Exploring Other Perspectives

Twenty fair value estimates from the Simply Wall St Community range from US$67.08 to US$110 per share. With many weighing ongoing risks around margin contraction, you can explore a spectrum of viewpoints that reflect just how differently Starbucks’ outlook may be viewed by market participants.

Explore 20 other fair value estimates on Starbucks - why the stock might be worth 21% less than the current price!

Build Your Own Starbucks Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Starbucks research is our analysis highlighting 1 key reward and 4 important warning signs that could impact your investment decision.
• Our free Starbucks research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Starbucks' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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