TD Cowen analyst Andrew M. Charles maintains a Hold rating and a $84 price target on Starbucks Corporation (NYSE:SBUX), suggesting that the company's turnaround is far less straightforward than improving investor sentiment implies.
His analysis of labor spending, margin dynamics, and 2026 earnings exposes cost pressures that challenge the Street's expectations and raise doubts about the strength of Starbucks' recovery.
Recent developments indicate a mixed but gradually stabilizing backdrop: revenue trends have begun to strengthen, even as earnings remain pressured by labor and operational investments, and potential tariff relief, along with progress in the company's China joint venture, have added cautious optimism by easing some cost headwinds.
Charles maintains a cautious outlook as he sees Starbucks working through a nonlinear, uneven reset. He identifies North America store operating expenses as the key earnings swing factor and projects 2026–27 EPS roughly 5% below consensus.
His model assumes 2026 NA store opex of 57.8%, slightly above the 57.2% implied by Consensus Metrix, reflecting labor investments that appear likely to exceed early guidance.
He embeds about $531 million in incremental opex for 2026 versus consensus at $308 million, noting that a 10-basis-point change in opex can move EPS by about $0.02.
He also forecasts 2026 NA cost of sales at 31.0%, a slight increase from the consensus, anticipating lingering pressure from coffee pricing despite limited tariff relief.
His EPS estimates fall to $2.25 for 2026 and $2.84 for 2027, weighed down by a more modest revenue boost from the closure of 438 underperforming North American stores.
While he still models 3.3% NA same-store sales growth in 2026 and expects EPS to improve as sales recover, Charles flags risks tied to weakening value perceptions, intensified competition, and the expansion of small-format drive-thrus.
He reiterates his $84 price target, supported by a valuation of 25x FY2028E EPS, which sits one turn above the five-year average FY2 P/E of 24x.
He argues this higher multiple is justified by improving sales trends, investor anticipation ahead of the Jan. 29 Investor Day, recent multiple expansion across the restaurant sector, and a healthier North American footprint following the closure of 438 underperforming stores.
SBUX Price Action: Starbucks shares were down 2.26% at $85.14 at the time of publication on Monday, according to Benzinga Pro data.
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