Starbucks stock price target lowered to $94 by UBS on sales challenges

Investing.com - UBS has lowered its price target on Starbucks (NASDAQ:SBUX) to $94.00 from $100.00 while maintaining a Neutral rating ahead of the coffee chain’s fourth-quarter earnings report scheduled for October 29. Currently trading at $84.53 with a P/E ratio of 36.6, InvestingPro data suggests the stock is trading above its Fair Value, with 12 analysts recently revising their earnings expectations downward.

The firm expects limited progress on Starbucks’ "Back to Starbucks" strategic initiatives, with sales trends likely still challenged due to the difficult industry environment. UBS anticipates margins and earnings will remain under pressure in the quarter. This aligns with InvestingPro data showing modest revenue growth of 0.59% over the last twelve months, with analysts expecting continued pressure on net income this year.

For the fourth quarter, UBS notes investor expectations center around U.S. same-store sales of approximately flat to modestly down, aligning with consensus estimates of -0.2%. There is also debate whether fiscal year 2026 guidance will be provided or delayed until the company’s Investor Day planned for early 2026.

UBS expects the earnings call to focus heavily on U.S. sales trajectory, as many initiatives including the Green Apron service model have been implemented but have shown little tangible progress in transaction growth despite easy comparisons.

While UBS believes Starbucks’ turnaround plan should support a gradual sales recovery over time, the firm is waiting for better visibility into positive sales growth inflection and greater margin clarity before taking a more constructive view on the stock. For deeper insights into Starbucks’ valuation and growth prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports, available for over 1,400 US stocks.

In other recent news, Starbucks has announced a modest increase in its quarterly dividend, raising it from $0.61 to $0.62 per share, which reflects an annualized rate of $2.48 per share. This marks the company’s fifteenth consecutive annual dividend increase. Additionally, Starbucks has unveiled a significant $1 billion restructuring plan that involves closing stores across North America, which is expected to lead to a 1% decline in net unit growth for fiscal year 2025.

Morgan Stanley has raised its price target for Starbucks to $105, maintaining an Overweight rating, citing the company’s turnaround potential despite an anticipated lackluster fourth fiscal quarter. Meanwhile, TD Cowen has lowered its price target for Starbucks to $84, keeping a Hold rating due to concerns about the company’s sales turnaround and the impact of its protein product launch. Stifel has maintained its Buy rating for Starbucks, reiterating a $105 price target, in light of the restructuring efforts. These developments highlight various perspectives on Starbucks’ financial outlook and strategic initiatives.

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