Quick Summary
- RBC Capital downgraded Starbucks from Outperform to Sector Perform while maintaining a $105 price target
- The rating cut stems from labor costs exceeding projections and limited clarity on margin recovery
- In July 2025, Starbucks unveiled a labor investment exceeding $500 million, surpassing RBC’s estimates
- Year-to-date in 2026, SBUX has climbed 16%, though it carries a P/E ratio of 81.43 — approaching historical valuation peaks
- Current analyst sentiment shows 48% Hold ratings and 40% Buy recommendations
Shares of Starbucks declined during Wednesday’s premarket session following an RBC Capital downgrade prompted by labor expenditures that significantly exceeded the firm’s initial projections.
RBC adjusted its stance on SBUX from Outperform to Sector Perform while keeping its $105 price objective unchanged. The shares retreated 0.9% to $96.70 before the opening bell.
When RBC initiated coverage back in November 2024, analysts believed the domestic operations could recover through modest, near-term capital allocation. Reality proved different.
Starbucks revealed in July 2025 plans to deploy over $500 million in incremental labor spending throughout the subsequent twelve months. This figure substantially exceeded RBC’s modeling assumptions.
Analyst Logan Reich noted the business investment proved “larger than we previously expected,” while offering minimal transparency regarding potential cost efficiencies or margin enhancement opportunities.
Reich further highlighted that market expectations surrounding revenue expansion have become “elevated, leaving less room for upside.” With shares trading near historical valuation multiples, sustaining an optimistic recommendation became increasingly challenging.
Neverthstanding the downgrade, SBUX has delivered solid performance through early 2026. The company exceeded first-quarter sales projections and has gained 16% since the beginning of January. During this identical timeframe, the S&P 500 has declined 1.9%.
Valuation Questions Emerge
The equity currently commands a P/E ratio of 81.43. InvestingPro identifies it as overvalued compared to Fair Value metrics, positioning it among its Most Overvalued selections.
RBC’s cautious stance reflects broader sentiment. Among all analysts tracking SBUX, 48% currently assign Hold ratings. Just 40% recommend Buy, with remaining coverage at Sell.
Guggenheim recently lowered its price objective to $95 while maintaining a Neutral position. The firm raised its second-quarter U.S. comparable store sales projection to 4.8% but reduced long-range EPS estimates spanning fiscal 2026 through 2028.
Wall Street Remains Divided
Not all analysts are turning cautious. Bernstein preserved its Outperform recommendation, highlighting management’s objective of achieving $3.35 to $4 EPS by 2028 through revenue acceleration and margin improvement.
Wolfe Research launched coverage with a Peerperform designation, recognizing the ongoing multi-year transformation initiative.
Starbucks did not provide commentary in response to inquiries before Wednesday’s market open.
Shares concluded Tuesday’s session near $97.
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