Overview
- Jefferies, which raised its rating Monday, moved Starbucks to Hold from Underperform and set a $92 price target following the April 2 close of the China joint-venture franchising deal.
- The China transaction shrinks Starbucks’ operating footprint abroad, where before the change international units made up about 33% of system sales, 27% of revenue, and 25% of operating profit, leaving it with the smallest overseas exposure among major quick-service peers.
- Jefferies’ earnings estimates of $2.27 for fiscal 2026 and $2.73 for fiscal 2027 sit below Street forecasts, reflecting lower same‑store sales assumptions and an operating margin outlook about 100 basis points under consensus due to ongoing labor spending and unclear cost savings.
- The firm flagged valuation as a constraint, noting Starbucks trades near 35 times forward earnings versus roughly 21 times for comparable restaurant franchises, a premium it called unwarranted.
- Jefferies said mid‑single‑digit same‑store sales growth in the second half of fiscal 2026 would likely be needed to drive meaningful upside, with consumer spending, labor costs, and margin pressure still posing execution risks even as early U.S. stabilization emerges.