Starbucks Upgraded by Wall Street Firms Following CEO Appointment of Chipotle's Brian Niccol

Several Wall Street firms have upgraded their ratings on Starbucks (NASDAQ:SBUX) following the announcement of a significant leadership change. On Tuesday, Starbucks revealed that it has appointed Brian Niccol, the current CEO of Chipotle, as its new Chief Executive Officer, succeeding Laxman Narasimhan. This news led to a dramatic 24% surge in Starbucks share price.

In light of Niccol's new role, analysts at Stifel have upgraded Starbucks stock to a Buy rating and raised their price target from $80 to $110. The analysts noted that while Starbucks remains a strong and popular brand, particularly across various generational groups, it has struggled with a clear growth strategy and execution. They anticipate that Niccol’s top priority will be to address and reverse the declining transaction trends in the U.S. market.

Stifel suggests that while Starbucks may continue its current initiatives—such as improving store efficiency, developing new products, and leveraging digital marketing—these efforts are likely to be more effectively prioritized and executed under Niccol's leadership. Although the firm has lowered its near-term earnings per share projections due to softer U.S. market performance, it has raised its long-term growth forecast, predicting a 20% growth rate over the next five years, up from its previous estimate of low double digits. This increase is based on the expectation of a solid recovery in transaction volumes.

Similarly, Evercore ISI analysts have upgraded their rating on Starbucks to Outperform, citing a higher likelihood of a U.S. brand resurgence with Niccol at the helm. They believe that under Niccol’s leadership, Starbucks has a strong opportunity to meet previous margin targets and revive traffic growth in its stores. Evercore projects that Starbucks could achieve over 15% earnings growth over the next three years, largely driven by a rebound in same-store sales (SSS) fueled by increased customer traffic in the U.S.