Normally a CEO is not, by themselves, all that newsworthy. But today is a little different, as Brian Niccol of coffee chain Starbucks (SBUX) was directly connected to two news items about the coffee chain giant. And investors liked the cut of Niccol’s jib, sending shares up around 1.5% in Wednesday afternoon’s trading.
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First came a report from CNBC, where Niccol declared an interest in working with its nascent union, amid current talks in process. Just a few months ago, Starbucks declared that it was planning to work together more closely with the Service Employees International Union, or rather, with the Workers United affiliate that represented the Starbucks baristas.
That in turn led Niccol to declare that “If our partners choose to be represented, I am committed to making sure we engage constructively and in good faith with the union and the partners it represents.” While it was hard to imagine him saying anything else, Starbucks’ outward behavior has not always agreed with such a stance strictly. Thus, it being publicly said likely meant a reassuring notion for the unionization efforts.
Niccol Hype “Overdone,” Says Jefferies
Yet at the same time, Jefferies’ managing director Andy Barish, noted that Niccol’s installation as CEO was a “much-needed jolt” to Starbucks stock. However, Barish still downgraded Starbucks stock to a Sell. That is actually the first time that Barish has given a Sell rating on Starbucks since 2011, when it first started covering Starbucks, a Fortune report noted.
Essentially, Barish pointed out what most have likely figured out for some time now: Starbucks’ problems—and there are quite a few—will not be fixed in one swoop by a CEO replacement. Rather, it will take time for Starbucks to get back on its feet. Several changes have already been brought forth, and this is a fine start. But it will take time for those changes to take hold. Barish expects Starbucks shares to decline 20% over the next year.
Is SBUX Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 14 Buy, nine Hold and one Sell recommendations assigned in the past three months, as indicated by the graphic below. After a 6.83% rally in its share price over the past year, the average SBUX price target of $99.80 per share implies 4.4% upside potential.
