Starbucks may be positioned for a rebound as its turnaround efforts gain traction, according to investment firm Baird.
The firm on Tuesday upgraded the coffee chain’s stock to outperform from neutral and raised its price target by $15 to $115, representing more than 25% upside from Monday’s closing price.
The move comes despite a recent slump in the shares, which have fallen more than 3% in the past month following the company’s latest quarterly results.
Those results marked Starbucks’ sixth consecutive quarter of same-store sales declines.
Baird analyst David Tarantino expressed confidence in the strategy being executed under CEO Brian Niccol, who took the helm with a focus on reigniting growth.
“We continue to have high conviction that turnaround strategies under new leadership will be effective in transforming Starbucks into a better company, and we expect visibility to this outcome to become increasingly clear over the next several quarters,” Tarantino wrote.
He added that tangible progress toward improved financial performance could help bolster investor sentiment and support higher valuation metrics as earnings recover.
Strategic investments and growth drivers
Tarantino expects stronger US comparable sales to materialize in 2026, underpinned by several new initiatives.
Among these is the “Green Apron Service,” which emphasizes customer service and human connection, including personalized touches such as Sharpie drawings on cups.
The company is also advancing its innovation pipeline with product additions like protein cold foam beverages and an upgraded bakery case.
On the operational front, Starbucks is committing approximately $500 million toward store-level labor investments.
Baird anticipates that further details on potential cost savings will be shared during the company’s Investor Meeting in early 2026.
These savings could come from areas such as general and administrative expenses, supply chain efficiencies, and store-level operating costs.
The firm believes these measures could help Starbucks work toward its long-term objective of restoring its operating margin to the fiscal 2019 level of 17%, compared to an estimated 10.3% in fiscal 2025.
Market performance and analyst sentiment
Shares of Starbucks were up more than 1% in premarket trading on Tuesday following Baird’s upgrade.
However, the stock’s performance this year has lagged the broader market, with just a 0.5% gain compared to the S&P 500’s more than 8% increase over the same period.
Wall Street analysts remain divided on the stock. Data from LSEG shows that out of 39 analysts covering Starbucks, 18 rate it a hold, 17 rate it a buy or strong buy, and four have underperform or sell ratings.
The mixed sentiment reflects both the challenges the company faces in reversing recent sales declines and the optimism surrounding its new leadership’s strategic initiatives.
Baird’s upgraded outlook suggests that investor confidence could grow if Starbucks delivers on its operational improvements and innovation plans.
If the company’s execution meets expectations, the firm sees the potential for significant upside over the next several quarters.
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