Improving Sales but Pressured Margins and Full Valuation Justify Hold Rating on Starbucks

UBS analyst Dennis Geiger has maintained their neutral stance on SBUX stock, giving a Hold rating yesterday.

Dennis Geiger has given his Hold rating due to a combination of factors related to Starbucks’ improving sales trends but still-challenged profitability. He notes that U.S. comparable sales and traffic are recovering, aided by the “Back to Starbucks” turnaround initiatives, operational improvements, and targeted product offerings, with early momentum also visible in the current quarter. International operations, particularly China, are contributing steady same-store sales growth, and management’s multi‑year guidance calls for modest comparable sales growth, slightly better operating margins, and earnings within a range that broadly aligns with consensus expectations. However, he highlights that ongoing investments in the turnaround, higher product and distribution costs, and limited sales leverage are weighing on margins and earnings, and these pressures are likely to persist in the near term.

At the same time, the planned pace of net new store openings is measured, and much of the incremental unit growth is expected internationally, rather than in higher-margin North America. Geiger also underscores that the stock is already trading at a premium multiple based on projected 2027 earnings, which requires greater confidence in Starbucks’ ability to expand margins and sustain profitable growth. He is looking to upcoming Investor Day disclosures for clearer evidence on the durability of sales momentum and the path to margin recovery before becoming more positive on the shares. Given this mix of improving demand but constrained earnings power and a full valuation, he believes a Hold rating is appropriate at this time.

In another report released yesterday, TipRanks – PerPlexity also upgraded the stock to a Hold with a $100.00 price target.