Is Starbucks (SBUX) Finally Turning the Corner? Jefferies Thinks Maybe

TLDR

• Jefferies upgraded Starbucks from Underperform to Hold, raising its price target to $92 from $86
• The upgrade follows the April 2 close of a China joint venture deal, reducing Starbucks’ international exposure
• Starbucks now has the least international exposure among large global quick-service peers
• Jefferies’ EPS estimates of $2.27 and $2.73 for FY26/FY27 remain below Wall Street consensus
• The stock trades at ~35x forward earnings, a large premium to peers at ~21x

Jefferies upgraded Starbucks (SBUX) to Hold from Underperform on Monday, lifting its price target to $92 from $86. The move came after the April 2 close of a China joint venture deal and early signs of stability in the U.S. business.

Starbucks Corporation, SBUX

The China JV deal meaningfully shrinks Starbucks’ international footprint. Before the deal closed, the international segment made up roughly 33% of global system sales, 27% of revenues, and 25% of operating profit.

With China now franchised, Starbucks has the least international exposure of any large global quick-service peer. That group includes McDonald’s, Yum Brands, Restaurant Brands International, and Domino’s Pizza.

Analyst Andy Barish and his team said the completed deal, combined with a stabilizing U.S. business, gives investors better visibility into the turnaround under CEO Brian Niccol. Niccol took over roughly 18 months ago.

Despite the upgrade, Jefferies is still more cautious than the rest of Wall Street. The firm’s EPS estimates of $2.27 for FY26 and $2.73 for FY27 sit below consensus of $2.30 and $2.95, respectively.

Why the Gap With Wall Street?

The more conservative outlook is driven by lower same-store sales assumptions and an operating margin forecast about 100 basis points below the Street. Jefferies expects ongoing investment in labor and limited visibility into cost savings.

On valuation, the picture is hard to ignore. Starbucks is trading at around 35 times forward earnings. Comparable global franchised restaurant companies trade at about 21x. The S&P 500 sits around 22x.

Jefferies called the premium “unwarranted” but noted that expectations have been reset to more realistic levels after a rough stretch for the stock.

What Would Push the Stock Higher?

Barish’s team said same-store sales growth in the mid-single digits in the second half of FY26 would likely be needed to move the stock higher. They see that as achievable but not guaranteed.

The macro backdrop adds uncertainty. Consumer spending trends, labor costs, and margin pressure all remain live risks for a premium coffee chain trying to hold pricing while also winning back value-conscious customers.

Still, the upgrade reflects a view that the worst-case scenario is less likely now. Reducing China exposure removes a key overhang that had weighed on the investment case for several quarters.

Niccol’s turnaround plan has been focused on improving operational execution, sharpening the brand, and restoring earnings momentum. The China deal is a concrete step in that direction.

Jefferies’ price target of $92 implies modest upside from current levels. The firm’s estimates remain below consensus, suggesting the team wants to see execution before getting more constructive.

The stock was down 0.33% at the time of the upgrade.

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