Starbucks (SBUX) Stock: Analyst Reactions to Q4 Results and New CEO’s Strategy
Starbucks Corporation (SBUX) shares are seeing a modest increase in trading on Thursday, following the release of their fourth-quarter earnings report. While the company reported revenues of $9.07 billion, falling short of analysts’ estimates of $9.38 billion, the focus is shifting towards the new strategic direction under CEO Brian Niccol.
The report revealed a 7% global decline in comparable store sales, driven by a decrease in transactions. However, the company did see a 2% increase in average ticket size, suggesting customers are willing to spend more at Starbucks. Despite the mixed results, Wedbush analyst Nick Setyan maintained a ‘Neutral’ rating on the stock, while adjusting the price forecast from $98 to $95.
Setyan acknowledged that the company’s current valuation reflects the uncertainty surrounding near-term revenue and earnings growth. However, he expressed confidence in the management team’s ability to drive long-term operating margin expansion and earnings per share growth aligned with historical rates. Setyan highlighted that CEO Niccol identified customer wait times as a key area for improvement, aiming to reduce them to under four minutes across all ordering methods. This focus on speed aims to enhance customer experience and deliver a more efficient service.
Setyan also noted that Starbucks will eliminate the upcharge for alternative dairy products, impacting comparable sales and operating margins by approximately 1% in the United States. The company is transitioning promotional efforts from offers to marketing, which could lead to lower unit growth in Fiscal Year 2025. Additionally, Starbucks plans to address current challenges through upcoming store renovations.
Based on these factors, Setyan lowered the FY25 EPS estimate to $2.88 from $3.35, while refraining from issuing FY26 estimates due to limited visibility.
Offering a more optimistic perspective, TD Cowen analyst Andrew M. Charles reiterated his ‘Buy’ rating on SBUX stock, maintaining a $110 price forecast. Charles acknowledges the need for customized solutions to achieve the targeted wait times of under four minutes. While no long-term guidance was provided, Charles believes the new strategy has the potential to achieve sustained North America same-store sales growth exceeding 5%, a critical factor for improving domestic margins.
Furthermore, Charles highlighted the company’s planned food & beverage SKU rationalization. He believes this simplification and focus on throughput efficiency may temporarily delay significant menu innovation as Niccol refines Starbucks’ product development process. However, he believes this streamlining will ultimately benefit the company. As a result of these anticipated changes, Charles reduced the 2025 EPS estimate from $3.98 to $3.06.
Ultimately, analysts’ opinions on Starbucks’ future remain divided. While some are optimistic about the long-term potential under the new leadership, others are cautious due to near-term challenges and limited visibility. The company’s ability to execute its new strategy and deliver on its promises will be key to determining the success of its transformation.
