Starbucks (SEX) shares could dip later in 2025 as it improves financial performances under the new CEO Brian Nicol after a challenging 2024, says a long-time Starbucks watcher Peter Saleh.
In Saleh's view, focus from Niccol – who took over as CEO in September 2024 — on faster service times, simpler pricing and better store operations are the ingredients to reestablish Starbucks shares as a top performer.
“We believe that progress against these initiatives in 2025 will set the stage for tremendous same-store sales and earnings growth in 2026 and beyond, catalyzing share gains as we move through the year and that the that recovery path is emerging,” Saleh, a BTIG restaurant analyst, said in a note on Thursday.
Saleh picked up Starbucks as one of his top first-half 2025 picks, assigning a price target of $115. The target assumes around 30% alongside current levels.
The average sell-side price target on Starbucks is currently $103, Yahoo Finance data shows.
“We expect 2025 to be a transition and investment year for Starbucks, as management has suspended guidance, slowed development, and reset operations to ensure a sustainable transformation,” Saleh wrote, suggesting that Starbucks' rebound will not be smooth sailing. smooth this year.
Starbucks' less-than-caffeinated financial results underscore that notion.
Starbucks' most recent quarter showed a 7% drop in global comparable store sales as consumers shunned higher-priced coffee and the chain's long wait times. North American comparable store sales were up 6%.
International sales plunged 9%, and Chinese like-for-like sales shrank 14%. Non-GAAP operating margin fell 380 basis points from the prior year to 14.4%.
“I'd love to see the foot traffic start to turn around to drive that same-store sales growth … That's going to be a key piece of the puzzle for us moving forward ,” Niccol told Yahoo Finance about the US business in a interview 4 November (video above).
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Starbucks shares ending 2024 down 5% compared with a 23% advance for the S&P 500. McDonald's (MCD) shares finished the year slightly up.
Starbucks shares – which for years have traded at relative premiums to rivals – trade at a 12-month price-to-sales ratio of 2.87 times. That's below fellow coffee presenters McDonald's (MCD), on 8.1 times, and Dutch Bros (BROS) at 4.1 times, back Yahoo Finance stock comparison tool.
“Obviously they made an incredible choice,” Brinker International (EAT) Chief Executive Officer Kevin Hochman to Yahoo Finance about his former Yum! Colleague Brands. “He's going to do his usual Brian Niccol magic. And I can't wait to see what they're going to be.”