(Bloomberg) -- Starbucks Corp. shares soared with the appointment of Brian Niccol as chief executive officer boosting optimism over an about-turn for the coffee maker. Bernstein analysts predict there’s more to come.
Analysts led by Danilo Gargiulo upgraded their rating on Starbucks to outperform from market perform and raised their price target to $115 from $92, implying an 18% jump from Thursday’s close.
“The turnaround will take time, but we believe that it will not need to be completed for the stock to start to work,” Gargiulo wrote in a note. Niccol is the “perfect CEO to guide the resurgence of today’s Starbucks, leveraging the experience he accumulated at Taco Bell and Chipotle, that were in a similar turnaround mode when he became CEO.”
Starbucks shares are up about 27% from the mid-August announcement that Niccol would take the reins, pushing the stock into positive territory year-to-date.
Changes are already underway in the company’s top brass under Niccol’s leadership. Starbucks named Molly Liu as the sole leader of the China business this month. It also announced it would create a global chief brand officer position to oversee product, marketing, digital, customer insights, creative and store concepts. Meanwhile, Michael Conway, Starbucks’ North America CEO, will retire in November.
“We expect further management changes and the reduction of spans and layers in the organization to act as a catalyst for the stock,” Gargiulo said.
Of course, Niccol is not without challenges. Gargiulo highlighted long morning wait times, cumbersome in-app experiences and passive stances on “critical” social issues like the Israel-Hamas war as key problems for Niccol to focus on in the coming months.
Bernstein’s upgrade contrasts with Jefferies’ call earlier this week, downgrading the coffee chain operator’s shares to sell and noting any turnaround will take time and could pressure the stock in the near term.
Bernstein is one of 19 firms tracked by Bloomberg that recommend buying Starbucks shares, up from 12 before the August announcement. The average price target is now $99 up from $86.
--With assistance from Carmen Reinicke.
(Updates stock move.)
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