Is Starbucks Quietly Setting Up for a Major 2026 Comeback?

Starbucks (NASDAQ: SBUX) is not out of the weeds—far from it—but the most recent earnings results reveal operational improvements that suggest it is still a good buy for 2026.

Among the highlights is significant margin compression, which is not ideal, but it is tied to restructuring costs and store closures that are expected to persist in upcoming quarters. Ultimately, this will leave the retailer in a lean operating condition.

The takeaway is that CEO Brian Niccol is executing his plan, trimming dead weight, and setting the company up for success, as evidenced by the results. Starbucks produced systemwide comp-store growth for the first time in nearly two years and is on track to sustain it in 2026.

Starbucks uses a fiscal calendar that ends in late September, so its fourth quarter (Q4) covers the months of July through September. 

Analyst response to the Q4 results varied, but overall reveals significant optimism within the group.

The first six revisions tracked by MarketBeat include an even number of reaffirmed and reduced price targets that align with the broader consensus.

The stock has a consensus Moderate Buy rating, up from its summer rating, with a 20% upside potential.

While analysts are limiting the upside in 2025 with price target reductions, that may change in 2026 as traction improves and is reflected in the results. 

Starbucks: Pain in 2025 Equals Gains in 2026

Starbucks’ Q4 results were mixed, with revenue growth offsetting bottom-line weakness. The top line came in at $9.6 billion, up 5% due to higher company-owned store counts and positive comparable store sales, offset by a reduction in total store count. The comp sales figures are the critical detail, as store closures were expected.

Comps were strong across most markets, with North America flat versus expectations of a decline and International up 3%, double its forecast. China is the weak link, up only 2% and below the forecast, but still growing. 

Margin is the primary concern for analysts. However, the 510 basis point reduction in operating margin is primarily due to one-time items that are not expected to recur. The remaining impacts are from rising input costs, specifically labor, which is central to Mr. Niccols' plans.

Improved staffing, culture and employee satisfaction drove appreciable results at Chipotle Mexican Grill (NYSE: CMG), helping to accelerate and sustain its growth, and will do the same at Starbucks; it just takes time. 

Starbucks did not provide specific guidance for the upcoming year but did provide optimistic commentary, including an update on U.S. comps. Niccol says U.S. comps turned positive in September and remained so through October. Comp gains were aided by the implementation of new sequencing algorithms, which reduced customer wait times to an average of four minutes. 

Institutions Buy Into Starbucks’ Turnaround Despite the Risks

Even though SBUX is trading near long-term lows, MarketBeat data shows institutions are buying Starbucks to the tune of approximately $1.50 per $1 sold, providing a strong support base as they own more than 70% of the stock.

The balance of activity is unlikely to change, given the Q4 results and outlook, but may slacken due to the risks.

Among them is the risk to the dividend. Starbucks' payout ratio is running above 100% and is not sustainable.

If the company cannot improve its margins in 2026 (which appears unlikely), a distribution cut is likely by year’s end. 

The SBUX price action suggests the results were nothing more or less than what the market expected. The stock price is struggling to gain traction near the low end of its trading range, but is well-supported with no indication of a decline.

The likely outcome is that the SBUX stock price will remain relatively stable at or near its early November levels until later in the year or early in 2026, when subsequent earnings are released. 

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The article "Is Starbucks Quietly Setting Up for a Major 2026 Comeback?" first appeared on MarketBeat.