UBS Reiterates Neutral Rating on Starbucks (SBUX)

UBS analyst Dennis Geiger reiterated a Neutral rating and $95.00 price target on Starbucks (NASDAQ: SBUX).

The analyst commented, "For SBUX’s F3Q earnings (7/29), we expect still challenged US traffic/sss trends, with margin & earnings pressure continuing given likely top line softness and incremental investments. Key investor expectations we've heard for F3Q include a US sss range of down ~2% / down ~1-2% (Consensus -2.0% US), while investor sentiment remains largely cautious given still sluggish sales trends, elevated investments, and limited visibility into the company's multiyear earnings power, while valuation isn't cheap. In addition to updates on strategic turnaround plans, much attention is specifically on any insights from the Green Apron Service Model (likely ~2K stores since May), including a potential quantified sales lift in those stores (we think investors are expecting ~MSD+) which could be one of the more impactful earnings call takeaways. We expect a go forward focus on a positive inflection in sales trends, which should occur in F4Q (Consensus 1.4%) against easy comparisons and based on a sequentially ~flat underlying 2-year stack, while more notable upside likely requires an acceleration in underlying trends with traction against: service model enhancements, marketing, and menu innovation. Our EPS estimates move modestly lower (including FY26 to $2.76) largely to reflect incremental labor investments. We look for better visibility into a positive inflection in underlying sales growth and greater earnings power clarity before getting more constructive on shares."

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Shares of Starbucks closed at $93.80 yesterday.

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