Baird upgrades Starbucks, says the turnaround picture is becoming clear

CNBC

a day ago

Starbucks may be set up for gains as its turnaround strategy takes hold over the coming quarters, according to Baird. The firm upgraded the coffee chain to outperform from neutral and increased its price target by $15 to $115. Its updated target calls for more than 25% upside from Monday's close. The stock has come under pressure in the past month, falling more than 3%, on the heels of its latest quarterly results showing its sixth consecutive quarter of same-store sales declines . But with CEO Brian Niccol saying that the company is "gaining momentum," analyst David Tarantino thinks growth could be around the corner. "We continue to have high conviction that turnaround strategies under new leadership will be effective in transforming Starbucks into a better company, and we expect visibility to this outcome to become increasingly clear over the next several quarters," the analyst wrote on Tuesday. "Tangible evidence of progress toward better financial performance should provide a boost to investor sentiment, helping to support elevated valuation metrics on the shares as earnings start to rebound." SBUX 3M mountain SBUX, 3-month Tarantino expects that stronger U.S. comps will emerge in 2026. That's bolstered by Starbucks' rollout of its " Green Apron Service " – which focuses on customer service and human connection through things like Sharpie drawings on cups – an enhanced innovation pipeline that includes drinks like the protein cold foam and an upgraded bakery case, among other factors, he noted. "We now have better visibility on store-level labor investments (~$500 million), and we expect to get details in upcoming quarters (Investor Meeting early calendar-2026) on cost savings opportunities, which we sense could be meaningful in multiple areas (G & A, supply chain, storelevel operating expenses) and provide some visibility into SBUX's long-term goal of returning operating margin back to F2019's level of 17% (from 10.3% in F2025E)," the analyst also wrote. Shares were more than 1% higher in the premarket on Tuesday. Year to date, they've lagged the broader market, rising only 0.5% compared to the S & P 500's more than 8% jump in the period. Analysts covering Starbucks are split, however. LSEG data shows that 18 of 39 of those covering the stock rate it a hold. Another 17 have a buy or strong buy. The remaining four hold underperform and sell ratings.