It may be time to book profits in the piping-hot shares of coffee giant Starbucks (SBUX).
Starbucks stock has gained 15% in the past month as investors prepare for restaurant wizard Brian Niccol, Starbucks’ newish CEO, to show markedly improved operating performance later this year.
But Jefferies veteran restaurant analyst Andy Barish warned Tuesday that the risk-reward ratio for the stock is unfavorable after its sizzling run. In large part, Barish’s concerns center around fundamentals that may take longer than the market appreciates to improve.
As of 12:22:05 PM EST. Market Open.
SBUX ^GSPC
«We believe Street estimates for second quarter same-store sales will prove overly optimistic and suspect the slope of the same-store sales recovery will be questioned as ticket growth begins to slow in the second half,» Barish wrote. «We see low visibility into the pace of recovery and potential earnings strength in fiscal year 2026 and 2027. With these risks not fully accounted for in Street estimates, we think some near-term weakness in the stock could emerge.»
Barish outlined four concerns for the bulls. First is if same-store sales don’t turn positive in the second quarter. Second, margin gains could be tough to achieve later this year as Starbucks invests in worker wages and hours. Third, the company walks back a $1 billion cost-savings goal articulated by prior management. And fourth, earnings per share take longer than expected to improve.
Barish reiterated an Underperform rating on Starbucks shares, which were relatively unchanged in early trading.
The company’s latest results underscore the challenges Niccol is up against.
Starbucks’ most recent quarter showed a 4% drop in global same-store sales as the company pulled back on discounts and consumers shunned its long lines. North America and US same-store store sales dropped 4%.
International sales weren’t any better amid pressure in key markets such as China. Same-store sales overseas declined 4%, with sales in China dropping 6% year over year.
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The company’s operating profit margins in its North America and international segments fell a combined 510 basis points from a year ago.
As a sign of the challenging road ahead, Starbucks again declined to share guidance for sales and earnings for its current fiscal year. Niccol pulled the guidance in October to free up space to invest in marketing, staff, and in-store experience.
«I think we’re definitely in the middle of a turnaround,» Niccol told Yahoo Finance (video above).
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