Key Points
RBC has downgraded its rating on SBUX from "Outperform" to "In-Line," while maintaining a target price of $105. In pre-market trading, the stock fell 0.9% to $96.70.
Since RBC began coverage of the stock in November 2024, analysts had predicted that domestic operations might turn around through moderate short-term capital allocation, but the reality has diverged significantly from expectations.
Analyst Logan Reich noted that the scale of operational investments has "exceeded our expectations," while transparency regarding potential cost efficiencies or profit improvement opportunities remains relatively low.
Reich further emphasized that market participants' expectations for revenue growth are "too high," limiting the upside potential. As the stock approaches historical valuation highs, maintaining an optimistic outlook becomes increasingly difficult.
Despite the downgrade, SBUX has performed strongly at the beginning of 2026. The company exceeded first-quarter revenue expectations, and its stock price has risen 16% year-to-date. In the same period, the S&P 500 index has declined by 1.9%.
Valuation Concerns Emerge
The stock currently has a price-to-earnings ratio of 81.43. InvestingPro indicates that the stock appears expensive compared to its fair value calculation, ranking among the most overvalued securities.
RBC's cautious stance is not an isolated case. Among all Wall Street analysts tracking SBUX, 48% currently give it a "Hold" rating, while only 40% maintain a "Buy" recommendation, with the remaining analysts issuing "Sell" ratings.
Guggenheim recently lowered its target price to $95 while maintaining a neutral rating. The firm raised its second-quarter same-store sales expectations to 4.8% but reduced its earnings per share estimates for fiscal years 2026 to 2028.
Wall Street Remains Divided
Not all analysts are choosing to retreat. Bernstein has maintained its "Outperform" rating, emphasizing that management plans to achieve earnings per share of $3.35 to $4.00 by 2028 through revenue expansion and profit improvement.
Wolfe Research has initiated coverage with a "Peer Perform" rating, recognizing its ongoing multi-year transformation strategy.
Starbucks did not comment on this before the market opened on Wednesday.
The stock closed near $97 on Tuesday's trading.