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Starbucks (NASDAQ: SBUX) shares rose 2% following an upgrade by Bernstein, which raised its rating to “Outperform” from “Market Perform” and increased the stock’s price target from $92 to $115. The upgrade reflects optimism about the company’s potential for growth under new leadership and operational improvements.
The positive outlook comes after the appointment of Brian Niccol as Starbucks’ new CEO, boosting investor confidence and resulting in a 27% rise in shares since the announcement. Bernstein believes Niccol’s experience with successful turnarounds at Taco Bell and Chipotle positions him well to guide Starbucks through its current phase.
Bernstein anticipates that Starbucks will shift toward more balanced growth, focusing on operational stability and efficiency rather than aggressive expansion. The firm expects this approach to streamline decision-making and reduce general and administrative expenses to historical lows of 6%.
The company is projected to return to pre-COVID operating margin levels of around 18.5%, with improvements in store operations, throughput, brand perception, and menu innovation driving traffic growth. Despite planned investments in labor and technology, operating margins are expected to reach new highs by 2028.
Bernstein views Starbucks as an attractive long-term investment, stating that its valuation still offers a compelling entry point for long-term investors even after recent gains.
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