Key Takeaways
TD Cowen upgraded Starbucks (NASDAQ:SBUX) to Buy from Hold on Thursday, lifting its price target to $120 and signaling fresh conviction in the coffee giant’s turnaround under CEO Brian Niccol. The stock gained nearly 2% on the news.
"We gained a greater appreciation that Starbucks is in the early innings of the North America revitalization," TD Cowen analyst Andrew Charles said in a note to clients, following a meeting with the company's management.
The upgrade pairs a new Buy rating, up from a previous Hold, with a $120 price target that implies more than 13% upside from Wednesday's closing price. Driving the call, the firm raised its North America same-store sales growth forecasts for 2026 through 2028 and lifted its fiscal 2028 earnings per share estimate by about 9% to $3.94, well above the consensus forecast of $3.65.
The move adds a key institutional endorsement to a stock that has already rallied 29% year-to-date, fueled by a decisive second-quarter earnings beat on April 28 that marked the first time in over two years the company grew both revenue and profit. Management raised its full-year guidance, forecasting comparable sales growth of 5% or greater.
TD Cowen's call hinges on the success of Niccol's "Back to Starbucks" plan, a strategy focused on operational efficiencies, menu innovation, and marketing to drive growth. The firm pointed to a "high frequency pace" of new menu items and better marketing as key levers.
The biggest debate among investors has been whether the heavy investments in labor and store operations could restore the company's historical margin profile of 17% to 19%. TD Cowen expressed optimism that an inflection point is near, citing easing coffee costs, leverage from stronger sales, and a management target of over $2 billion in cost savings over the next several years.
The upgrade provides a significant vote of confidence in CEO Brian Niccol's strategy, suggesting the heavy investments in labor and operations are set to produce durable earnings growth. Investors will now watch for the company's third-quarter results to see if the sales momentum and margin recovery can be sustained.
This article is for informational purposes only and does not constitute investment advice.
