On Wednesday, TD Cowen reaffirmed its positive stance on Starbucks Corporation (NASDAQ:SBUX) shares, maintaining a Buy rating and a price target of $115.00. The firm's analyst acknowledged Starbucks' promising January performance and management's forecast for second-quarter comparable store sales (comps) to surpass market expectations. This optimistic outlook comes earlier than the consensus had anticipated. With a current market capitalization of $120.11 billion and trading near its 52-week high, InvestingPro analysis suggests the stock is slightly overvalued at current levels, despite showing strong momentum with a 35% gain over the past six months.
Starbucks management expects that by the fourth fiscal quarter, the savings from reduced general and administrative (G&A) expenses, due to streamlining efforts at the support center, will offset the incremental costs associated with the restructuring. This projection has led TD Cowen to sustain its earnings per share (EPS) estimates for 2026-2027, supporting the continued $115 price target, which is based on 25 times the projected 2027 EPS.
Despite a 4% decline in North America same-store sales in the first quarter, Starbucks saw a sequential improvement within the quarter. The company achieved this by cutting discounted transactions by 40% and reallocating those savings to marketing efforts. These changes spurred increased traffic and spending from non-Starbucks Rewards customers, particularly noticeable in the morning hours.
Furthermore, management expressed confidence during the after-call, predicting growth in global same-store sales in the second quarter, primarily driven by North America. They also expect sales to strengthen in the second half of fiscal 2025. January's performance provided encouraging signs for this growth, despite some disruptions caused by adverse weather conditions.
In other recent news, Starbucks Corporation has been the subject of several key developments. The company's first fiscal quarter of 2025 saw an earnings per share (EPS) of $0.69, surpassing the consensus estimate of $0.67, largely due to better-than-expected comparable store sales. However, Starbucks anticipates a dip in EPS for the second fiscal quarter due to ongoing investments and restructuring efforts. Analyst firm BMO Capital Markets has raised its price target for Starbucks to $115, while Piper Sandler and Bernstein SocGen Group have maintained their targets at $110 and $115, respectively. Stifel analysts have also held firm on their Buy rating for Starbucks stock, raising the target to $114.
Meanwhile, Jefferies analyst Andy Barish has maintained an Underperform rating on Starbucks stock, expressing concerns about the core business. In additional developments, Starbucks is testing a new order sequencing algorithm at pilot locations to streamline service. Furthermore, Alshaya Group, a Kuwait-based conglomerate, has paused discussions regarding the sale of a stake in its Starbucks Corp . franchise. These recent developments provide investors with insights into Starbucks' operational and financial landscape.
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