We all know that fast food giants all over the spectrum are rolling out value menus these days, or augmenting the ones they already had, in a bid to get more customers in the door and actually buying things. But you can forget about coffee giant Starbucks (SBUX) being one of those, thanks to recent remarks from CEO Brian Niccol. Investors were not even sort of pleased, and sent shares careening down nearly 2.5% in Friday afternoon’s trading.
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When Brian Niccol first joined Starbucks back in 2024, he was tasked with turning Starbucks around, after its first revenue decline in four years. Customers were increasingly displeased with the wait times at Starbucks, and the rising prices were not exactly helpful either. And while Starbucks has started to turn things around, there are still substantial problems as customers find store closures a problem and Starbucks looks to keep its coffee bean costs under control.
This led to some wondering if, perhaps, now was the time to bring out a value menu with low-cost options to get people in the door again. Niccol put the kibosh on that one, saying, “We have a huge point of difference and that is, I think, that customer connection and the experience you get in our stores. I just believe, at the end of the day, the experience sets us apart from everybody else.” It seems Niccol is banking on the experience to justify premium pricing, a point that may not work well when people want to just get their drink and go.
Perking Up
Even without a few cheap beverages to call the customers in, Starbucks is still showing signs of turning things around. The quarterly earnings report demonstrated as much. While quarterly earnings proved a bit soft, same-store sales were actually up for the first time in two years.
But even Starbucks itself urged caution about reading too much into the results it has posted. Chief Financial Officer Cathy Smith noted, “Turnarounds are difficult to forecast, and while we have good reason to believe that our U.S. company-operated [same-store sales] should build through the year, we also know that recoveries are not always linear.”
Is Starbucks Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 13 Buys, seven Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 15.9% loss in its share price over the past year, the average SBUX price target of $98.17 per share implies 20.75% upside potential.
