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Jefferies upgraded Starbucks (SBUX) from Underperform to Hold on Monday, lifting its price target to $92 from $86. The move comes as the coffee giant completes its China joint venture deal and shows early signs of stabilization in its domestic business.
The April 2 closing of the China JV significantly reduces Starbucks' international exposure. Before the deal, the international segment represented roughly a third of global system sales, 27% of revenues, and 25% of operating profit. With China now franchised, Starbucks carries the least international exposure among major global quick-service restaurant peers, including McDonald's, Yum Brands, Restaurant Brands International, and Domino's Pizza.
Analyst Andy Barish and his team noted that reduced international risk, combined with a steadier U.S. business, gives investors better visibility into the company's ongoing turnaround under CEO Brian Niccol, who joined approximately 18 months ago.
That said, Jefferies remains cautious. Its earnings per share estimates of $2.27 for fiscal 2026 and $2.73 for fiscal 2027 fall below Wall Street consensus figures of $2.30 and $2.95, respectively. The firm projects more conservative same-store sales growth and an operating margin roughly 100 basis points below the Street, reflecting expected continued labor investment and limited clarity on cost savings.
Valuation also remains a concern. Starbucks trades at approximately 35 times forward earnings, a steep premium compared to around 21 times for global franchised restaurant peers and 22 times for the broader S&P 500. Jefferies called this premium unwarranted, though it acknowledged that market expectations have been reset to more realistic levels.
For meaningful stock upside, Jefferies believes Starbucks will need to deliver mid-single-digit same-store sales growth in the second half of fiscal 2026 — achievable, but far from guaranteed given today's uncertain macroeconomic environment.
