Starbucks (SBUX) saw a 21% surge in its stock price today after the coffee shop giant announced Brian Niccol, the CEO of Mexican food restaurant Chipotle (CMG), as its new leader to replace current CEO Laxman Narasimhan. Analysts are optimistic about the change. In fact, Evercore ISI’s David Palmer noted Niccol’s history of driving operational improvement and brand innovation at Chipotle.
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In addition, Baird upgraded Starbucks to an Outperform rating with a $110 price target due to its confidence that Niccol’s brand management skills will boost Starbucks’ performance, especially in the U.S. market. Positive reactions also came from Stifel, Bank of America, Morgan Stanley, and activist investor Elliott Investment Management. Indeed, Elliot praised the CEO change as a “transformational step forward.”
Brian Niccol’s appointment followed a meeting with Starbucks Founder and former CEO Howard Schultz, who was enthusiastic about the leadership change. Mellody Hobson, a Chairperson of Starbucks, shared in an interview with CNBC that Schultz considered the decision a “home run” and was thrilled about the new direction.
CMG Stock Sinks
While Starbucks is having one of its best days since going public, CMG stock is sinking, down over 11% at the time of writing. Indeed, Brian Niccol, who joined Chipotle in 2018 and will be departing on August 31, has been credited with turning the company around following its E. coli outbreak in 2015. In fact, under his leadership, CMG stock soared over 800%.
Is Starbucks a Buy or Sell?
Overall, analysts have a Moderate Buy consensus rating on SBUX stock based on nine Buys, 18 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 1% year-to-date loss, the average SBUX price target of $86.26 per share implies 8.49% downside risk.
