It's been a hot-and-cold year on the price charts for Starbucks (SBUX) stock. Shares trended lower until mid-August when news that former head of Chipotle Mexican Grill (CMG) Brian Niccol would become the coffee chain's new CEO sparked a big swing higher. The stock is up more than 32% since then and back in positive territory for the year to date.
However, not everyone is convinced the recent rally will continue, with one analyst arguing that despite Niccol's successful track record, Starbucks stock is a Sell.
Specifically, Redburn Atlantic analyst Edward Lewis downgraded Starbucks stock to Sell from Neutral (equivalent to Hold) and assigned a $77 price target, according to MarketWatch.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Lewis said the downgrade came after reviewing the company's "Back to Starbucks" plan, which includes changes such as reintroducing the coffee condiment bar, ceramic mugs and more comfortable seating in its stores, simplifying pricing, adjusting the menu and adding more staff during its busiest hours.
"Our chief concern is the cost Starbucks must incur to deliver this recovery," Lewis said. "With shares trading above a 20-year average price-to-earnings multiple, there is little room for error."
The analyst believes the costs of Niccol's plan is not currently reflected in analysts' earnings estimates for Starbucks, which means the consumer discretionary stock is overvalued at current levels.
Lewis' $77 price target sits more than 20% below where Starbucks' is presently trading.
Where do other analysts stand on Starbucks stock?
Despite Starbucks' longer-term troubles on and off the price charts, most of Wall Street remains bullish on the blue chip stock.
According to S&P Global Market Intelligence, the average analyst target price for SBUX is $102.38, representing implied upside of nearly 4% to current levels. Additionally, the consensus recommendation is Buy.
Financial services firm Stifel is one of those with a Buy rating on Starbucks, along with a $110 price target.
"In our opinion, Mr. Niccol delivered his [turnaround] message with a level of clarity and precision that is typically the hallmark of a talented leader who knows how to focus an organization on solving the right problems," wrote Stifel analyst Chris O'Cull in an October 30 note.
O'Cull admits that the next few quarters will be "challenging" for Starbucks, but he is "encouraged by the cohesiveness of [Niccol's] plan, and the potential for the initiatives to meaningfully improve the guest experience and the trajectory of the business over time."
He anticipates the second half of fiscal 2025 "should yield meaningful evidence the strategy is working."
Related Content
-
AI vs the Stock Market: How Did Alphabet, Nike and Industrial Stocks Perform in June?AI is a new tool to help investors analyze data, but can it beat the stock market? Here's how a chatbot's stock picks fared in June.
-
Stock Market Today: A Historic Quarter Closes on High Notes"All's well that ends well" is one way to describe the second quarter of 2025, at least from a pure price-action perspective.
-
AI vs the Stock Market: How Did Alphabet, Nike and Industrial Stocks Perform in June?
AI is a new tool to help investors analyze data, but can it beat the stock market? Here's how a chatbot's stock picks fared in June.
-
Stock Market Today: A Historic Quarter Closes on High Notes
"All's well that ends well" is one way to describe the second quarter of 2025, at least from a pure price-action perspective.
-
Keep Tax Collectors at Bay with Muni Bond FundsMunicipal bonds can be good insurance against inflation — and interest is tax-free. But as with all investments, understanding risk is key.
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the FairwayThink of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty MovesIf you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.
-
Cord Cutting Could Help You Save Over $10,000 in 10 YearsHow cutting the cord can save you money and how those savings can grow over time.
-
Should I Buy Stocks or Bonds Right Now?Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
