Starbucks Stock (SBUX) Downgraded To Underperform Leading Into Earnings

Starbucks Corporation (NASDAQ: SBUX) heads into next week's earnings report facing a freshly brewing storm of analyst concern. Jefferies analyst Andy Barish delivered a sharp jolt to the market this week, downgrading the coffee giant's stock from “Hold” to “Underperform” while maintaining a price target of $76.

This move underscores growing skepticism about the pace and efficacy of Starbucks' ongoing turnaround efforts, particularly in the face of operational issues and evolving consumer behavior.

The downgrade implies more than a 15% downside from the latest price action ($92.84 ), and arrives as Starbucks' stock has continued to underperform through 2025. While SBUX has added 0.53% year-to-date, it remains significantly below its 52-week high of $117.46, and a significant underperformer on broader markets, with the S&P 500 having added more than 7% so far this year.

Barish's rationale centers on the belief that the market has prematurely priced in improvements to Starbucks' fundamentals. His analysis points to concerning trends in key performance indicators.

Credit and debit card data, coupled with foot traffic and app usage metrics, suggest potential downside risks to U.S. comparable sales estimates for the upcoming third and fourth fiscal quarters. This paints a worrying picture of slowing momentum in Starbucks' core market, despite ongoing efforts to revitalize the brand.

The Jefferies downgrade also sheds light on internal complexities hindering Starbucks' progress. Barish highlighted the “complex” nature of the company's people and operating issues, suggesting that these challenges may take longer to resolve than initially anticipated.

This aligns with recent reports detailing employee discontent over the company's evolving return-to-office policy, a key component of CEO Brian Niccol's “Back to Starbucks” initiative. The policy, which mandates corporate employees to work in the office four days a week, has sparked internal protests and raised concerns about the company's culture under Niccol's leadership.

Starbucks has reported five consecutive quarters of declining same-store sales and reduced customer traffic, indicating that the turnaround under the new CEO is proving to be a formidable task. The investments required to implement these changes are also weighing on earnings, further dampening sentiment.

The upcoming earnings report on July 29th could prove to be crucial in determining whether Starbucks can turn things around. Analysts currently estimate a consensus EPS of $0.65 per share. However, the recent downgrade and the underlying data suggesting weakening sales trends raise the possibility of a potential earnings miss.