Stephanie Link is buying shares of this turnaround story. The comeback could become clear this week
Hightower's Stephanie Link lays out the case for Starbucks ahead of earnings Wednesday.
TL;DR
- North American same-store sales were flat last quarter, a positive sign after six consecutive quarters of decline.
- CEO Brian Niccol's initiatives could increase operating margins from 9% to the mid-teens.
- Many Wall Street analysts remain skeptical, creating a favorable risk/reward scenario.
- Starbucks shares have gained 14% in 2026, with potential for more growth.
- Niccol's "Green Apron Service" is designed to accelerate order delivery, with some stores achieving service times under four minutes.
- International sales grew 3%, with China up 2%.
- Analysts predict 2% North American same-store sales growth for the fourth quarter, with some expecting up to 3%.
- Deutsche Bank estimates operating margins could reach 17%, leading to an earnings power of $3.50 to $4 per share.
- Historically, Starbucks stock traded at a price-earnings multiple of 28 times, suggesting potential for multiple expansion.
- Less than half of Wall Street analysts currently recommend Starbucks as a buy.