Should you sell your Starbucks stock?

Lorne Steinberg Wealth Management senior vice-president of equities Martin Cobb told BNN Bloomberg’s Market Watch on Nov. 26 that Starbucks’ (Starbucks Stock Quote, Chart, News, Analysts, Financials NASDAQ:SBUX) turnaround efforts under CEO Brian Niccol are beginning to show signs of stabilization in its core U.S. business.

Asked whether the company’s operational reset, store closures, staffing changes and digital upgrades was showing up in performance, Cobb said the early signals are encouraging.

“You’re starting to,” he said, noting that Niccol’s arrival initially pushed the stock up more than 20%. While he doesn’t typically “put a huge stock in management,” Cobb argued the new strategy directly addresses Starbucks’ biggest issue: the U.S. customer experience.

“They were alienating customers,” he said. “They got away from that third-place community feel.”

Cobb pointed to menu complexity and long ordering interactions as examples, adding that simplifying the offering and reducing wait times are now clear priorities.

“It’s not rocket science,” he said. “They just have to get back to what customers want.”

Cobb also pointed to stabilization in U.S. trends last quarter and said the company is repositioning its China operations, once 13% of overall profit but now roughly half that level, through a joint venture with a local operator.

He believes that if Starbucks can restore its mid-teens operating margins and re-establish a more consistent customer experience, the earnings power supports materially higher share prices.

“You have $5.00 per share in earnings; per share it’s an $80 stock,” he said.

Starbucks shares have fallen 14.65% over the past 12 months and 11.90% over five years. Street coverage includes 19 Buy, 15 Hold, and 6 Sell ratings, with a consensus price target of US$91.06.

Starbucks closed Nov. 27 at US$86.70.

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