Starbucks (SBUX) Stock Downgraded by RBC on Higher Labor Costs

TLDR

• RBC Capital cut Starbucks from Outperform to Sector Perform, keeping its $105 price target
• The downgrade was driven by higher-than-expected labor costs and unclear margin improvement path
• Starbucks announced a $500M+ labor investment in July 2025, larger than RBC had anticipated
• SBUX is up 16% year-to-date in 2026, but trades at a P/E of 81.43 — near its peak historical multiple
• 48% of analysts covering SBUX now rate it as Hold, with 40% at Buy

Starbucks stock slipped in premarket trading Wednesday after RBC Capital downgraded it, citing labor costs that have grown well beyond what the firm originally expected.

Starbucks Corporation, SBUX

RBC moved SBUX from Outperform to Sector Perform, holding its price target steady at $105. The stock dropped 0.9% to $96.70 in premarket action.

When RBC first took on coverage in November 2024, the firm believed the U.S. business could be turned around with relatively small, short-term investments. That didn’t play out.

Starbucks announced in July 2025 it would pour more than $500 million into additional labor over the following year. That was bigger than RBC had built into its model.

He also flagged that investor expectations for sales growth were “elevated, leaving less room for upside.” The stock is trading near its peak historical multiple, which made it harder to keep a bullish rating.

Despite the downgrade, SBUX has had a strong start to 2026. It beat sales expectations in Q1 and is up 16% since January 1. The S&P 500 is down 1.9% over the same stretch.

Valuation Concerns Mount

The stock is currently trading at a P/E ratio of 81.43. InvestingPro flags it as overvalued relative to its Fair Value, placing it on its Most Overvalued list.

RBC isn’t alone in its cautious tone. Of all analysts covering SBUX, 48% now rate it as Hold. Only 40% have a Buy rating, with the rest at Sell.

Guggenheim recently trimmed its price target to $95 while keeping a Neutral rating. It nudged up its Q2 U.S. same-store sales forecast to 4.8% but cut long-term EPS estimates for fiscal years 2026 through 2028.

Analyst Views Still Mixed

Not everyone is stepping back. Bernstein kept its Outperform rating, pointing to the company’s goal of reaching $3.35 to $4 EPS by 2028, driven by revenue growth and margin expansion.

Wolfe Research started coverage with a Peerperform rating, acknowledging the multi-year turnaround effort underway.

Starbucks did not respond to a request for comment ahead of Wednesday’s open.

The stock closed Tuesday at approximately $97.

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