A Brewing Recovery: Starbucks Shares Poised for a Comeback
After a challenging 2024, Starbucks (SBUX) is gearing up for a major turnaround under the leadership of new CEO Brian Niccol. According to Peter Saleh, a seasoned Starbucks analyst, the company’s focus on improving service times, simplifying pricing, and enhancing store operations will be the key drivers of its recovery.
A Recipe for Success
Saleh believes that Niccol’s initiatives will pave the way for impressive same-store sales and earnings growth in 2026 and beyond. He has assigned a $115 price target, implying a 30% upside from current levels. This optimistic outlook is supported by the average sell-side price target of $103.
A Transition Year Ahead
However, Saleh acknowledges that 2025 will be a transition year for Starbucks, marked by suspended guidance, slowed development, and operational reset. This may lead to a bumpy ride for investors, but the long-term prospects look promising.
Recent Struggles
Starbucks’ recent quarter was marred by a 7% drop in global comparable-store sales, driven by consumers’ reluctance to pay higher prices and endure long wait times. North America comparable store sales fell 6%, while international sales plummeted 9%. Non-GAAP operating profit margins also declined by 380 basis points to 14.4%.
Turning the Corner
CEO Brian Niccol has expressed his desire to see foot traffic increase, driving same-store sales growth. This will be a crucial factor in the company’s turnaround. With Niccol at the helm, industry insiders are optimistic about Starbucks’ prospects.
Valuation Perspective
Starbucks shares currently trade at a trailing 12-month price-to-sales ratio of 2.87 times, below its competitors McDonald’s (MCD) and Dutch Bros (BROS). This undervaluation presents an attractive opportunity for investors.
A Vote of Confidence
Brinker International (EAT) CEO Kevin Hochman has expressed his confidence in Niccol’s ability to turn Starbucks around, citing his impressive track record. As the company navigates its transition year, investors will be watching closely for signs of progress.
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