Starbucks (SBUX) is at last serving up the results investors have been craving. The coffee giant just brewed a 54% jump in earnings, its fifth straight quarter of comparable sales growth, and yet another boost in operating margins. There is still work ahead, but the turnaround under CEO Brian Niccol is starting to seem less like a trial run and more like a company confidently finding its stride. SBUX stock has climbed roughly 29% year-to-date (YTD). That momentum could make SBUX stock worth holding on to as its next chapter of growth unfolds.
www.barchart.com The “Back to Starbucks” Strategy Is Finally Bringing Customers Back
Starbucks' most enduring challenge over the past few years has been to lure customers back into its coffeehouses. Rival chains like Dunkin', Dutch Bros (BROS), and the rapidly expanding drive-through newcomers 7 Brew and Scooter's Coffee have been turning up the heat, while McDonald's (MCD) McCafé is attracting price-conscious customers with cheaper coffee options. The fourth-quarter earnings showed customers are returning and sales growth is picking up. Global comparable sales increased 7.2%, marking the fifth straight quarter of gains.
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Even more impressive, U.S. comparable sales jumped 7.7%, and North America saw a 7.9% increase. These numbers strongly signal that Starbucks' comeback is gaining real momentum in its most crucial market. Importantly, the U.S. improvement was not simply the result of customers paying higher prices. Transactions climbed 2.4%, and the average ticket jumped 5.2%. This means Starbucks is thriving, thanks to both a steady stream of new visits and customers who are willing to spend more each time. CFO Cathy Smith pointed out that growth is happening across all income levels and throughout the day, showing that the recovery reaches far beyond just a select group or the morning coffee rush.
At the core of this transformation is the Back to Starbucks strategy. Niccol is on a mission to revive the spark that made Starbucks beloved in the first place: warm, attentive service, orders ready in a flash, drinks made to perfection, and a coffeehouse vibe that welcomes you like an old friend. Starbucks is investing heavily in more baristas and refreshed stores to make sure every visit feels like a treat you can count on. In a world overflowing with coffee choices, these upgrades are essential. Starbucks needs to win hearts and keep customers coming back for more.
Menu Innovation and Digital Engagement Offer More Growth Opportunities
Winning customers back is one thing. But keeping them engaged is another challenge. Starbucks is focusing on new menu items to spark fresh interest, especially outside its usual morning coffee crowd. New drinks like espresso, matcha, and Refreshers, along with new food options, help the company reach a wider range of tastes and occasions. Growing its afternoon business matters because it gives Starbucks more chances to make sales throughout the day.
Starbucks’ digital ecosystem is opening up new ways for the company to grow. Starbucks Rewards now has 36 million active members, giving the company a strong community that promotes repeat visits and supports new product launches. Management is improving the app by adding delivery, so customers can earn and use rewards when they order from home. The company is also adding AI-powered ordering and personalization to make each interaction easier and more engaging.
These changes matter because they help Starbucks form more in-depth bonds with its most loyal customers. This can boost growth without relying solely on opening new stores or raising product prices. If successful, these digital innovations and inventive menu offerings could open the door to steadier, more dependable sales growth.
Margin Recovery and International Expansion Could Drive Earnings Higher
Starbucks' improving profitability provides another reason to be optimistic. In the fourth quarter, adjusted EPS rose 54% from last year to $0.80, and the operating margin improved to about 14%. For fiscal 2026, adjusted EPS went up 27% to $2.72, thanks to higher sales and better cost controls. Starbucks has identified about $2 billion in potential savings and has already achieved more than half of that target.
International expansion could help Starbucks boost earnings. The company is shifting to a lighter asset model in China through a licensed joint venture, and it is also seeking more growth in China and India. Management plans to open about 1,200 new coffeehouses worldwide in fiscal 2027. In fiscal 2027, Starbucks expects adjusted EPS between $3.15 and $3.25, about 18% growth at the midpoint. But overall revenue may fall by about 1%, partly because of changes in its China business. Investors should watch whether better margins and higher comparable sales can keep earnings growing. Analysts forecast earnings growth of 18.2% in fiscal 2027, followed by another 16% in fiscal 2028.
Is SBUX Stock a Good Long-Term Buy?
Starbucks faces its share of hurdles, yet its Q3 earnings signal that its turnaround is taking hold. Rising customer traffic, robust profitability, bold digital moves, and global expansion open up exciting paths for growth. The company’s iconic brand and loyal customer base set it apart from competitors. With a 32x forward P/E, investors are clearly betting on a strong recovery and lasting earnings growth.
For long-term investors confident in Starbucks’ ability to maintain its sales momentum under Niccol’s leadership and transform this earnings rebound into long-term growth, the company stands out as an excellent buy-and-hold choice.
Overall, Wall Street rates SBUX stock a “Moderate Buy.” Of the 35 analysts covering the stock, 13 rate it a “Strong Buy,” two rate it a “Moderate Buy,” 16 rate it a “Hold,” one says it is a “Moderate Sell,” and three rate it a “Strong Sell.” Based on its average target price of $109.38, SBUX stock has an upside potential of a little over 1% from current levels. However, its high price target of $141 implies the stock can climb 31% over the next 12 months.
www.barchart.com On the date of publication, Sushree Mohanty did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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