Key Takeaways
- RBC Capital downgraded Starbucks from Outperform to Sector Perform while maintaining a $105 price target
- Rising labor expenses and uncertain margin recovery prospects prompted the rating change
- The coffee giant unveiled a labor investment exceeding $500M in July 2025, surpassing analyst projections
- SBUX shares have climbed 16% in 2026 year-to-date but carry a lofty P/E ratio of 81.43
- Analyst consensus has shifted, with 48% now rating the stock as Hold and 40% at Buy
Shares of Starbucks declined during Wednesday’s premarket session following a downgrade from RBC Capital, which highlighted labor expenditures that have exceeded the firm’s initial projections.
RBC shifted its stance on SBUX from Outperform to Sector Perform while keeping its $105 price objective unchanged. Premarket trading saw the stock decline 0.9% to $96.70.
When RBC initiated coverage back in November 2024, analysts anticipated the domestic operations could be revitalized through modest, near-term capital deployment. Reality proved different.
In July 2025, Starbucks revealed plans to allocate over $500 million toward expanded labor resources throughout the subsequent twelve months. This figure exceeded RBC’s financial modeling assumptions.
According to analyst Logan Reich, the business investment proved “larger than we previously expected,” while offering minimal clarity regarding potential cost efficiencies or margin enhancement.
Reich additionally noted that market participants hold “elevated” sales growth expectations, which “leaving less room for upside.” With shares approaching historical valuation peaks, sustaining an optimistic recommendation became challenging.
The downgrade notwithstanding, SBUX has delivered impressive performance in early 2026. The company surpassed revenue forecasts in its first quarter and has advanced 16% since the year began. During this period, the S&P 500 has retreated 1.9%.
Valuation Questions Intensify
The stock currently commands a P/E multiple of 81.43. InvestingPro identifies it as overpriced compared to its Fair Value calculation, including it on the platform’s Most Overvalued compilation.
RBC’s cautious perspective isn’t isolated. Among all analysts tracking SBUX, 48% currently assign Hold ratings. Just 40% recommend buying, with remaining analysts suggesting selling.
Guggenheim recently lowered its price objective to $95 while maintaining a Neutral stance. The firm raised its second-quarter U.S. comparable store sales estimate to 4.8% but reduced longer-term earnings per share projections spanning fiscal 2026 through 2028.
Wall Street Remains Divided
Not all analysts are retreating. Bernstein retained its Outperform designation, highlighting management’s objective of achieving $3.35 to $4 in EPS by 2028 through revenue expansion and margin improvements.
Wolfe Research launched coverage with a Peerperform rating, recognizing the ongoing multi-year transformation initiative.
Starbucks did not provide comments when contacted prior to Wednesday’s market opening.
Shares concluded Tuesday’s session near $97.
