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Investors may now be underestimating the scale of the coffee chain’s recovery. TD Cowen believes the company’s business is only at the beginning of a long improvement, not in its final stages, according to investing.com.
The market reacted immediately, with Starbucks shares adding about 1.4% before trading opened.
In a new forecast, TD Cowen markedly improved the company’s earnings expectations for the coming years. Analysts now believe Starbucks will be able to earn more than previously estimated – about 6% above Wall Street consensus forecasts for 2026-2028.
Growth should come from two main factors: increased sales at North American coffee shops and cost reductions. The company is also expected to benefit from more efficient business operations as revenue grows, according to analysts.
Separately, TD Cowen raised expectations for margins, a key measure of profitability. It could reach 15.1% by 2028, above current market forecasts. This should be supported by cost savings, lower raw material costs and increased operational efficiency.
Analysts also note that confidence in Starbucks’ strategy has increased after meeting with the company’s management team. As an example of management experience, they mentioned the work of top managers in Yum! Brands, where the Taco Bell chain was previously developing.
The $120 target price is based on the company’s expected earnings in 2028, a year that analysts consider the moment of normalization of the business after its “reboot.”
