Jefferies on Monday moved Starbucks Corp. to a Hold rating from Underperform, pointing to reduced international exposure following the early-April closing of a joint venture agreement for the company's China operations and to preliminary indications that the core U.S. business is stabilizing. The brokerage also raised its 12-month price target to $92 from $86, saying the changes give a clearer line of sight on the coffee chain's turnaround under Chief Executive Brian Niccol, who has been in charge for roughly 18 months.
The analysts noted that the completion of the China transaction - completed April 2 - substantially lowers Starbucks' international footprint. Before the deal closed, the international segment represented about 33% of global system sales, roughly 27% of revenues and about 25% of operating profit.
With the China business now franchised, Jefferies says Starbucks carries the least international exposure among its large global quick-service peers, a group that it identifies as McDonald’s, Yum Brands, Restaurant Brands International and Domino’s Pizza. The brokerage argued this reduced overseas weighting, combined with early signs of U.S. stabilization, improves visibility around the company executing its turnaround.
"With relatively less Int'l exposure now that China is franchised (deal completed April 2) and, more importantly, a stabilizing U.S. business, we think visibility into SBUX executing its turnaround is improved," the Jefferies team led by Andy Barish said.
Despite the upgrade, Jefferies remains circumspect on Starbucks' near-term fundamentals. The firm’s internal estimates sit below Wall Street consensus through fiscal 2027. Jefferies models earnings per share of $2.27 for fiscal 2026 and $2.73 for fiscal 2027, compared with consensus forecasts of $2.30 and $2.95, respectively. The difference in the FY27 forecast is driven by more conservative same-store sales assumptions and an operating margin view roughly 100 basis points below the Street, with Jefferies expecting continued investment in labor and limited clarity around potential cost savings.
On the outlook, the analysts said: "We maintain a slightly more conservative outlook than the Street through FY27, which we think will require strong execution across most sales-& cost-initiatives, but think the co. can execute against its targets."
Jefferies also highlighted valuation as a constraint on the stock's upside. Starbucks is trading at about 35 times forward earnings, the brokerage noted, versus roughly 21 times for comparable global franchised restaurant companies and about 22 times for the S&P 500. The firm characterized the multiple as a large premium to asset-light peers and said it views that premium as unwarranted, while acknowledging that investor expectations have been reset to more realistic levels.
Looking ahead, Jefferies said a catalyst for meaningful upside to the stock would be same-store sales growth in the mid-single digits in the second half of fiscal 2026, a pace the firm considers achievable but not guaranteed given an uncertain macroeconomic backdrop.
Sector and market context: The note has direct relevance for the quick-service restaurant segment and broader consumer discretionary/equities markets, as shifts in Starbucks' exposure and operating outlook affect peer comparisons, valuation benchmarks and investor expectations in the space.