Brewing Caution: Jefferies Warms Up To Starbucks With Tepid Upgrade

Jefferies analyst Andy Barish on Wednesday upgraded the shares of Starbucks Corp (NASDAQ:SBUX) from Underperform to Hold with a price forecast of $76, based on a 21x multiple of fiscal 2026 earnings forecasts.

Starbucks’ recent stock struggles reflect uncertainty around near-term earnings, driven by consumer concerns and potential tariff-related inflation, said the analyst.

With no formal guidance and a new CFO in place, the analyst expects a slower, more modest earnings rebound over the next two years, likely aligning with below-consensus projections.

Starbucks is facing a deep-rooted cultural and workforce transformation, which the analyst said will take time to show results.

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Unlike Chipotle's quicker turnaround under Brian Niccol, Starbucks lacks similar groundwork. The upcoming fiscal second-quarter may fall short of expectations due to restructuring and one-time costs, raising doubts about the pace of recovery in the second half and likely leading to reduced fiscal 2026–2027 projections.

The analyst plans to monitor progress on Starbucks’ “Back to Starbucks” initiative, which includes investments in staff and technology to improve service speed and operational consistency.

The company is aiming to hit a four-minute service target but faces headwinds, including rising coffee costs and limited pricing flexibility.

With recent price hikes rolling off, average check size could come under pressure in the second half, though U.S. same-store sales are expected to gradually improve, noted the analyst.

According to the analyst, Starbucks' valuation appears more reasonable now, trading at roughly 20 times projected fiscal 2027 earnings, a level that has historically marked a floor during tough periods.

The analyst said core recovery will require more time than most investors anticipate, especially with short-term challenges like potential tariff impacts increasing the overall risk.

Despite limited short-term earnings clarity, analysts expect clearer signals in the coming quarters as leadership stabilizes.

SBUX Price Action: Starbucks shares traded lower by 4.84% at $84.42 at publicationThursday.

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