RBC Downgrades Starbucks (SBUX) Stock Amid Rising Labor Investment Concerns

Key Takeaways

• RBC Capital downgraded Starbucks from Outperform to Sector Perform while maintaining a $105 price target
• The rating cut stems from elevated labor investments and uncertain margin recovery trajectory
• The coffee giant unveiled a labor investment exceeding $500 million in July 2025, surpassing RBC’s projections
• Shares have climbed 16% in 2026 year-to-date, though the stock trades at a P/E multiple of 81.43 — approaching historical highs
• Current analyst consensus shows 48% Hold ratings and 40% Buy ratings on SBUX

Shares of Starbucks declined during Wednesday’s premarket session following a downgrade from RBC Capital, which expressed concern over labor expenditures significantly exceeding the firm’s initial projections.

Starbucks Corporation, SBUX

RBC shifted its stance on SBUX from Outperform to Sector Perform while keeping its $105 price objective unchanged. Pre-market trading saw the stock decline 0.9% to $96.70.

When RBC initiated coverage back in November 2024, analysts believed the domestic operations could experience a turnaround through modest, near-term capital allocation. Reality proved different.

Starbucks revealed in July 2025 plans to invest over $500 million in additional workforce expenses throughout the subsequent twelve months. This commitment substantially exceeded RBC’s financial modeling assumptions.

Reich further highlighted that market participants harbor “elevated” revenue growth expectations, “leaving less room for upside.” With the stock approaching peak historical valuation multiples, sustaining a positive outlook became increasingly challenging.

Despite the downward revision, SBUX has demonstrated robust performance entering 2026. The company surpassed first-quarter revenue estimates and has appreciated 16% year-to-date. During this identical timeframe, the S&P 500 has declined 1.9%.

Valuation Questions Emerge

The equity currently commands a P/E ratio of 81.43. InvestingPro identifies the stock as expensive compared to its Fair Value calculation, positioning it among its Most Overvalued securities.

RBC’s cautious perspective isn’t isolated. Among all Wall Street analysts tracking SBUX, 48% currently assign Hold ratings. Just 40% maintain Buy recommendations, with remaining analysts at Sell.

Guggenheim recently reduced its price objective to $95 while maintaining a Neutral stance. The firm increased its second-quarter domestic comparable store sales projection to 4.8% but lowered earnings per share estimates spanning fiscal years 2026 through 2028.

Wall Street Remains Divided

Not all analysts are retreating. Bernstein maintained its Outperform rating, highlighting management’s objective of achieving $3.35 to $4 EPS by 2028 through top-line expansion and profitability improvements.

Wolfe Research launched coverage with a Peerperform rating, recognizing the ongoing multi-year transformation strategy.

Starbucks did not provide commentary when contacted prior to Wednesday’s market opening.

The equity concluded Tuesday’s session near $97.

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