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At a Glance
- Starbucks stock jumped after earnings, but gains faded as valuation concerns resurfaced.
- Revenue growth is improving, yet margins remain under pressure from labor and coffee costs.
- With SBUX trading near overbought levels, investors may want to wait for a pullback.
Starbucks Corp. (NASDAQ: SBUX) stock briefly spiked 5% higher after the company delivered mixed earnings before market open on Jan. 28.
Starbucks posted revenue of $9.92 billion, which came in ahead of the forecast for $9.62 billion. Earnings per share (EPS), however, came in at 56 cents, which missed estimates by 3 cents.
Despite a revenue beat, within an hour of the opening bell, SBUX stock had given up some of those gains and dropped below the psychologically important $100 level.
Heading into earnings, analyst sentiment was generally bullish. However, the consensus price target for SBUX stock was $103.19, suggesting the stock was overbought.
Given the mixed earnings and conflicted price action, investors are wondering if analysts—and the market—agree with Starbucks' CEO, Brian Niccol, who described the company’s turnaround plan as "on track."
Below, we'll explore Niccol's turnaround plan in depth and examine how economic factors, such as input costs and the 2026 outlook, could affect the company going forward.
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Getting Back to Its Roots
The core of Niccol’s turnaround plan is to revive the “coffeehouse experience” of Starbucks. Essentially, the idea is to return Starbucks to its roots as a destination for gathering, which will drive sales volume and, by extension, earnings.
The idea that revenue growth will come first, followed by earnings, tracks with the current quarter, though the company acknowledged that its margins and EPS remain pressured.
Same-store sales were up 4% in the quarter, demonstrating that the plan could be working. Starbucks also posted its first comparable transaction growth in the United States in eight quarters. The company's viral "Bearista" cold cup almost certainly contributed to this with a short-term sales lift this last quarter.
That said, like most retail stocks, Starbucks is particularly sensitive to labor costs and traffic trends in the United States and China. If headwinds persist in these areas, it could limit the company's comeback.
Consumers Shouldn’t Expect Price Relief
Earnings reports from companies like Kimberly-Clark (NYSE: KMB) indicate that consumers are still seeking value. Value, however, may be hard to find at Starbucks, given its reputation for premium pricing.
In the earnings report, management acknowledged that Starbucks is dealing with higher input costs. And no matter what the Supreme Court rules regarding the IEFA tariffs imposed by the Trump administration, the core issue will persist.
The good news is that coffee prices, which have surged over the last two years, may not move sharply higher. The bad news is they’re not likely to move lower either. Coffee futures in 2026 look structurally tight and volatile, with upside risk still outweighing downside. That's especially true for Arabica, which is used by Starbucks.
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SBUX Stock Flashing Overbought Signals
SBUX stock looks stretched, with a price now near the upper Bollinger Band and a relative strength indicator (RSI) around 70, a level often seen as overbought for short‑term traders. For patient investors, a better buy zone would likely come after a pullback toward the middle of the Bollinger Bands, roughly near the 20‑day moving average (around $91.24), where prior consolidations have formed.
That area often acts as support and could offer a more favorable risk‑reward entry point compared to chasing new highs. Investors might also consider scaling in gradually rather than buying all at once to manage volatility.
The Tough Comps May Be in the Past
In the current unfavorable retail environment, Starbucks's growth in both overall revenue and same-store sales suggests that something is clicking with customers.
Additionally, the 2026 revenue and earnings outlook is more favorable. If that outlook materializes, that could make the difference for SBUX stock.
Niccol is controlling what he can control, and there's an argument that he’s playing the cards he was dealt as well as he can. Meanwhile, more store openings and digital innovations may add some support to margin growth as the coffeehouse stages its comeback. As a long-term play, SBUX stock still has brand cache and, perhaps, pricing power down the road.
Investors have to ask how much they’re willing to pay for SBUX stock today. At over 60x earnings, the stock is expensive relative to its historical average and will remain slightly overvalued even at a forward P/E of around 32x.
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