Evercore ISI raises Starbucks stock price target on higher earnings

Evercore ISI raised its price target on Starbucks to $115 from $110 and kept an Outperform rating, while lifting FY2026 EPS to $2.45 from $2.30 versus $2.30 consensus. The firm also increased FY2027/FY2028 EPS estimates to $3.25/$4.00 and boosted North America same-store sales expectations to 6% from 5%, above the roughly 4% consensus. The note highlights improving transaction trends and continued momentum in the Back to Starbucks turnaround.

Analysis

The key signal here is not that Starbucks is improving, but that the market is re-rating the durability of the improvement faster than fundamentals are compounding. At an 80x+ earnings multiple, the stock is now trading like a secular software name, so the burden of proof shifts to sustained ticket growth and mix expansion rather than just a few strong quarters. That makes the setup asymmetric: incremental upside from another clean print is limited unless management proves the turnaround can persist through a softer consumer backdrop and wage pressure.

The second-order winner is the broader “operational reset” cohort in consumer discretionary: if Starbucks can translate traffic recovery into margin leverage, investors will be more willing to underwrite expensive brand turnarounds elsewhere. The losers are lower-quality coffee and beverage competitors that rely on price rather than experience; they face a tougher comparison if Starbucks keeps restoring traffic without heavy discounting. Supply-chain pressure should remain manageable in the near term, but any acceleration in store-level throughput could tighten labor scheduling and expose execution risk faster than consensus expects.

The main contrarian risk is that estimates are getting pulled forward into the stock faster than the consumer is actually healing. If North America comps normalize from the current rebound to low-single digits, the multiple can de-rate even with positive earnings revisions, because the market is implicitly pricing a multi-year compansion of growth. In the next 1-2 quarters, the cleanest reversal trigger is any evidence that transaction momentum is mix- or promo-dependent rather than structurally durable.

What is likely underappreciated is how much of the upside is now optionality on margin, not revenue. If the company delivers even modest operating leverage, earnings can compound quickly off a relatively small base, but if wage inflation or traffic softness hits, the downside is magnified because expectations have moved ahead of normalization. That makes this a good stock to own only with a defined time horizon and a willingness to monetize strength after each beat.

Key Decisions for Investors

• Avoid initiating a fresh outright long in SBUX at current levels; if already long, trim into strength ahead of the next earnings window because the valuation leaves little room for even a small comp miss.
• For investors who want exposure, use a call spread instead of stock: buy 6-12 month upside only if you believe the turnaround can keep comping above consensus, with max loss capped to premium.
• Pair trade: long SBUX / short a weaker premium coffee or restaurant name on any relative-valuation spread widening; the trade works if Starbucks continues to win traffic while peers cannot match the execution reset.
• Set a tactical alert for any guide-down in same-store sales cadence over the next 1-2 quarters; that would be the highest-probability signal to short the multiple, not the earnings line.
• If SBUX rallies another 8-10% on confirmation, harvest gains rather than add — the risk/reward becomes materially less attractive once the market fully prices the next year of estimate revisions.