Starbucks is facing a pivotal moment as it attempts to rebound from a challenging operational period that has seen its stock drop 22% from its July 2021 peak. After a significant 145% rise in share price over three years, the coffee giant’s recent struggles, including a 28% decline in adjusted earnings per share (EPS) from fiscal 2022 to fiscal 2025, have raised investor concerns. However, management’s forecast for adjusted EPS to grow by 73% by fiscal 2028 offers a glimmer of hope for potential outperformance against the S&P 500.
The company’s turnaround strategy includes enhancing its loyalty program, menu innovation, and investments in labor and technology to improve customer experience. While comparable transactions rose 3% in the first quarter of fiscal 2026, the competitive landscape and external economic factors could impact Starbucks’ recovery.
Investors should be cautious, as the stock trades at a high valuation of 46 times fiscal 2025 adjusted EPS. Without a significant drop in this multiple, achieving the projected EPS growth may not translate into substantial stock returns, suggesting a careful approach is warranted.
Source: fool.com