A number of Wall Street firms lifted their ratings on Starbucks (NASDAQ:SBUX) stock in the past day after the coffeehouse chain announced the appointment of a new CEO.
Specifically, Starbucks said Tuesday it has hired Chipotle (NYSE:CMG) CEO Brian Niccol to replace Laxman Narasimhan, sending its shares surging 24.5% for their best day on record.
Meanwhile, Chipotle shares fell 7.5% on Tuesday.
Following Niccol’s appointment, analysts at Stifel upgraded the SBUX stock to Buy while also lifting their price target from $80 to $110.
“We believe that Starbucks remains a healthy and relevant brand across most generational cohorts, but it lacks a coherent growth strategy and struggles with execution,” they wrote. “Upon arrival, we assume Mr. Niccol's top priority will be reversing the negative U.S. transaction trend.”
According to Stifel, Starbucks may continue to pursue its current objectives, which include enhancing store throughput, innovating new products, and leveraging digital marketing. However, under Niccol's leadership, these initiatives are expected to be better prioritized and executed.
While Stifel has reduced its near-term earnings per share (EPS) forecast for Starbucks due to weaker U.S. trends, the firm has increased its 5-year growth rate estimate to approximately 20%, up from the previous low double digits. This revision reflects the expectation of a healthy recovery in transaction numbers.
Separately, analysts at Evercore ISI also raised their rating on Starbucks shares to Outperform, citing “an increased probability of a US brand turnaround under Brian Niccol.”
“With the hiring of Brian Niccol as Chairman and CEO of Starbucks, the company has a good chance to deliver against old margin targets while restoring traffic growth,” they noted.
Evercore’s team believes that a 3-year earnings growth of over 15% is achievable for SBUX, primarily driven by a recovery in same-store sales (SSS) led by increased traffic in the U.S.
They emphasize that the hiring of Niccol could lead to a pivotal shift from the company being “Founder-led to Founder-inspired,” a change they see as strengthening the management team and attracting top long-term investors who are currently underweight on SBUX.
Several other analysts upgraded Starbucks stock in the past 24 hours, including those from Barclays, TD Cowen, Deutsche Bank, and Baird.