Jefferies has issued a bearish call on Starbucks, downgrading the global coffee giant from Hold to Underperform, citing a disconnect between the company’s recent stock performance and its underlying fundamentals.
The move comes amid a 13% rally in Starbucks shares over the past three months, a climb that analyst Andy Barish believes is not justified by the company’s current operational reality.
Barish set a new price target of $76, implying an 18% downside from the stock’s closing price on Wednesday.
The Starbucks shares fell 1.68% in the premarket session after the downgrade. In 2025, Starbucks stock has seen high volatility with stock moving up by only 0.37%.
In a note to clients, the analyst cautioned that investor expectations have moved ahead of actual business performance. “We think expectations have once again settled too far ahead of reality: no strong evidence yet (in comps or margins) of meaningful and lasting fundamental improvements to the business,” Barish wrote.
He also highlighted ongoing challenges such as the need for “significant investments” in both technology and personnel over the near- and medium-term.
These expenditures, according to Barish, could weigh on future margins and earnings, further exacerbating concerns about the company’s financial trajectory.
Strategic priorities under scrutiny
In addition to valuation concerns, Barish raised questions about Starbucks’ strategic direction.
Specifically, he pointed to the company’s focus on hot beverages and in-store experiences, which runs counter to broader industry trends emphasizing cold beverages and drive-thru formats.
These segments have gained popularity across the food and beverage landscape, driven by consumer demand for convenience and customization.
Barish noted that Starbucks’ approach may not align with current market dynamics, especially given ongoing macroeconomic uncertainty. “Some questionable strategic priorities,” he wrote, are casting doubt on the company’s ability to remain competitive in a shifting landscape.
While Starbucks has long positioned itself as a premium brand with a focus on customer experience, Jefferies believes this model may face limitations without corresponding improvements in core financial metrics such as same-store sales and operating margins.
Valuation premium draws skepticism
Another focal point of Jefferies’ downgrade was Starbucks’ current trading multiple.
According to Barish, the stock is valued at approximately 38 times forward earnings, significantly higher than the industry average of 24.
This premium, he argues, is not supported by current performance trends or visibility into future growth.
“With low near- and medium-term visibility, we find the current valuation unwarranted,” Barish stated, signaling caution for investors evaluating the stock at current levels.
He added that without clear signs of improvement in key metrics, the stock may struggle to justify its elevated price.
Earlier, Citi also said the $10 billion valuation of Starbucks China is overvalued.
Starbucks is scheduled to report its fiscal third-quarter results later this month, a moment that could provide investors with more clarity on the company’s trajectory.
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