Starbucks (SBUX) stock is surging in Tuesday's session after the coffee chain announced the immediate departure of Laxman Narasimhan as CEO. The company also said current Chipotle Mexican Grill (CMG) CEO Brian Niccol will take over the role on September 9. Rachel Ruggeri, chief financial officer at Starbucks, will serve as interim CEO until Niccol comes on board.
"We are thrilled to welcome Brian to Starbucks," said Mellody Hobson, current board chair at Starbucks, in a statement. "His phenomenal career speaks for itself. Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth." Hobson will step down as board chair next month and become lead independent director.
Brian Niccol became CEO of Chipotle in March 2018 after serving as CEO of Taco Bell for several years. During his tenure as head of Chipotle, its stock returned roughly 700%. Today, though, Chipotle stock is sinking on the news of Niccol's departure.
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"I am excited to join Starbucks and grateful for the opportunity to help steward this incredible company, alongside hundreds of thousands of devoted partners," said Niccol said in press release, adding that he has "long-admired Starbucks iconic brand, unique culture and commitment to enhancing human connections around the globe."
Niccol is replacing Narasimhan, who has had a tough time during his short tenure as Starbucks CEO. Indeed, through the August 12 close, the large-cap stock had declined more than 20% since Narasimhan was named CEO in March 2023.
Today's news comes just days after the The Wall Street Journal reported that Starboard Value had built a stake in Starbucks, joining fellow activist investor Elliott Management, which has a sizable position in SBUX, in a push for changes at the coffee chain.
Is Starbucks stock a buy, sell or hold?
Despite Starbucks' struggles on the price charts, Wall Street is bullish on the blue chip stock.
According to S&P Global Market Intelligence, the average analyst target price for SBUX stock is $89.66, representing implied upside 16% to last night's close –
but a 7% discount to current levels. Analysts could upwardly revise their price targets following today's pop. Meanwhile, the consensus recommendation is Buy.
"I cheered at the Starbucks news and on the Starbucks side, because the stock has been a colossal disappointment, as has Laxman. I'm sorry to say that," said Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, in a statement. "It was great to see the board take action, though they had to be prodded by activist investors. But Brian Niccol just worked magic at Chipotle … Niccol will fix Starbucks."
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