Bernstein Upgrades Starbucks to Outperform, Shares Up 2%

Starbucks (NASDAQ:SBUX) shares rose more than 2% pre-market today after Bernstein analysts upgraded the company to Outperform from Market Perform, expressing optimism about the company's leadership change and potential for operational improvement. The firm raised its price target to $115 from $92, reflecting confidence in Starbucks’ ability to drive future earnings growth despite near-term challenges.

This upgrade follows the appointment of Brian Niccol as Starbucks' new CEO, a move that has already boosted investor confidence, with shares climbing 27% since the announcement. Bernstein praised Niccol’s leadership experience at Taco Bell and Chipotle, positioning him as the right person to guide Starbucks through its current transition.

While acknowledging that a full turnaround will take time, Bernstein is optimistic that Starbucks could start benefiting from Niccol’s strategic changes sooner rather than later. The firm anticipates a shift toward more balanced growth, prioritizing operational stability over aggressive expansion. Streamlined decision-making and reduced general and administrative expenses—expected to fall to historical lows of 6%—are key components of this strategy.

Bernstein also predicts that Starbucks will return to pre-Covid operating margin levels of around 18.5%, driven by improvements in store operations, customer traffic, and menu innovations. Despite planned investments in labor and technology, operating margins are expected to hit new highs by 2028 as efficiencies are realized.