Starbucks stock could double from recent lows, says Bernstein

Bernstein analysts reiterated an Outperform rating on Starbucks (SBUX) and raised their price target to $100 from $90, citing improved visibility into the company's multi-year turnaround driven by $1.5B-$2B in labor investments. These efforts are projected to reduce turnover, enhance productivity, and drive traffic, leading to a rebound in North American same-store sales to 5% by 2027-28 and a return to 15.3% company-level EBIT margins by 2028, paving the way for $4.30 EPS. Bernstein believes SBUX could double from its post-Q2 lows and gain another 35% in the next two years, outperforming the S&P500 due to over 20% EPS growth and a 30x premium multiple.

Analysis

Bernstein analysts have reiterated their Outperform rating on Starbucks (SBUX) and increased the price target to $100 from $90, signaling strong confidence in a multi-year turnaround strategy. The core of this bullish thesis rests on a planned labor investment of $1.5 billion to $2 billion over the next two years, which is expected to add one employee per store across 7,000 locations and increase labor hours per worker by 8% by fiscal 2027. This investment is projected to reduce staff turnover, thereby lowering training costs and enhancing store productivity, which in turn is expected to drive customer traffic through improved service speed and hospitality. While Bernstein anticipates continued negative traffic in North America through fiscal 2025, they forecast a significant rebound beginning in 2026, with same-store sales growth accelerating to 5% by 2027-28. This operational improvement is modeled to restore EBIT margins to 19% in North America and 15.3% at the company level by 2028, creating a clear path to $4.30 in Earnings Per Share (EPS). Consequently, the firm projects a potential 35% stock price appreciation over the next two years, supported by 20%+ EPS growth and a premium 30x valuation multiple, positioning the stock to outperform the S&P 500.

Key Decisions for Investors

• Investors with a long-term horizon may consider the analyst's detailed turnaround plan as a basis for a bullish position, viewing the current valuation as an entry point for a multi-year recovery.
• It is crucial to acknowledge the near-term risk, as the report explicitly forecasts negative customer traffic in North America through fiscal 2025, suggesting patience will be required before the turnaround materializes in top-line results.
• Investors should closely monitor execution on the labor strategy and its impact on key metrics, specifically customer traffic trends post-2025, progress toward the 15.3% company-level EBIT margin target, and achievement of the forecasted 5% same-store sales growth.