RBC Downgrades Starbucks (SBUX) Stock Amid Escalating Labor Expense Concerns

TLDR

Table of Contents

RBC Capital downgraded Starbucks from Outperform to Sector Perform while maintaining a $105 price target
Rising labor expenses exceeding initial projections prompted the rating change
In July 2025, Starbucks revealed plans for over $500M in additional labor spending, surpassing RBC’s estimates
Year-to-date 2026, SBUX shares have climbed 16%, yet the stock carries a P/E ratio of 81.43 — approaching historical highs
Nearly half of Wall Street analysts (48%) now have Hold ratings on SBUX, while 40% recommend buying

Shares of Starbucks experienced a decline during Wednesday’s premarket session following a downgrade from RBC Capital, which pointed to workforce-related expenses that have significantly exceeded the firm’s initial projections.

Starbucks Corporation, SBUX

RBC shifted its stance on SBUX from Outperform to Sector Perform, maintaining its $105 target price. In early trading, the stock declined 0.9% to reach $96.70.

Back in November 2024 when RBC initiated coverage, analysts anticipated that the coffee giant’s domestic operations could recover through modest, near-term capital outlays. Reality proved different.

Starbucks disclosed in July 2025 its intention to invest upward of $500 million in workforce enhancements throughout the subsequent twelve months. This figure substantially exceeded RBC’s financial models.

According to analyst Logan Reich, the business investment proved “larger than we previously expected,” while offering minimal clarity regarding potential cost efficiencies or profitability enhancements moving forward.

Reich further noted that market participants hold “elevated” expectations for revenue expansion, “leaving less room for upside.” With the stock trading near historical valuation peaks, maintaining an optimistic outlook became increasingly difficult.

Despite the downward revision, SBUX has delivered impressive returns in early 2026. The company exceeded first-quarter revenue projections and has gained 16% since the year began. By comparison, the S&P 500 has fallen 1.9% during the same timeframe.

Valuation Concerns Mount

Currently, the stock commands a P/E ratio of 81.43. InvestingPro identifies it as overpriced compared to Fair Value metrics, including it on the platform’s Most Overvalued list.

RBC’s skepticism isn’t isolated. Among all analysts tracking SBUX, 48% now assign Hold ratings. Just 40% maintain Buy recommendations, with the remainder issuing Sell ratings.

Guggenheim recently lowered its target to $95 while preserving a Neutral stance. The firm increased its second-quarter U.S. comparable store sales projection to 4.8% but reduced earnings per share estimates for fiscal years 2026 through 2028.

Analyst Views Still Mixed

Not all observers are retreating. Bernstein maintained its Outperform rating, highlighting management’s objective of achieving $3.35 to $4 in EPS by 2028 through revenue acceleration and profitability expansion.

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

Starbucks did not provide commentary in response to inquiries before Wednesday’s market opening.

Shares concluded Tuesday’s session near $97.