Starbucks will undergo a major transformation in 2026. Shares of coffee giant Starbucks are struggling to find their footing after a difficult 18 months marked by slowing U.S. foot traffic, inconsistent execution, rising labor and restructuring costs, and sustained weakness in China. Still, we believe Starbucks is one of the top five club stocks poised for a strong recovery in 2026. Starbucks Year-to-date performance: Down 8% Forward price-to-earnings ratio: 33.3 vs. 5-year average 27.8 Our rating: Buy 1 rating Our price target: $100 per share SBUX YTD Mountain SBUX’s year-to-date price performance. The turnaround is still on track with CEO Brian Nicol at the helm. After just over a year in the job, Nicol hopes to regain full operational discipline, rebuild customer trust and prove he can deliver the same brand and growth acceleration he achieved when he led fast-food chain Chipotle. Jim Cramer reminded investors that Starbucks is in a “long-term transition” due to the scale of the restructuring and the complexity of the challenges. Ultimately, if Starbucks can accomplish these three things, 2026 should be the year that Starbucks’ turnaround takes a clearer shape. 1. The company must modify its core U.S. operations. Nicol’s Green Apron reinvention plan is centered around simplifying store operations, reducing wait times and getting drinks to customers quickly, and must show measurable improvements in throughput and customer satisfaction. Starbucks unveiled its Green Apron model in July and committed $500 million to the initiative. This is Starbucks’ largest investment in operations and customer service in its history. There are already signs of progress. For example, U.S. company-operated same-store sales turned positive in September, management announced in its latest quarter. Starbucks noted that sales momentum remained strong through October. This is a welcome development, but investors are hoping for more gains. If investors see further evidence that Nicol’s investment will lead to faster routes, more peak-hour beverage production, stronger traffic trends, and ultimately more sales, that should be a boost to the stock price. It’s not the only thing that can move the needle. 2. If Starbucks can better demonstrate its value proposition to customers, the coffee giant can increase its trading volume. As we’ve seen during the holiday shopping season, consumers are increasingly looking for value – high-quality experiences at affordable prices. This is especially true for discretionary purchases such as drinks and snacks. Starbucks is working to revamp its menu and offer more appealing drinks, including its newest line of protein drinks. Improving engagement with the Starbucks Rewards member group could be another avenue for growth. But some Wall Street analysts argue that Starbucks could face headwinds in the first half of 2026 due to restructuring, increased marketing investment and coffee inflation. That led Mizuho to envision a “no operating margin expansion” model for fiscal 2026, which is why analysts lowered their fiscal 2026 earnings per share (EPS) forecast to $2.40 from $2.56 in November. The company has given the stock a hold rating. Similarly, Jefferies expects next year to be “unfavorable” for Starbucks due to “continued pressure on margins.” The company rates the stock the equivalent of a “sell” rating. Both Wall Street firms cited a lack of outlook for growth in key U.S. markets as the reason for their cautious view. We hope to get more insight on this when Starbucks holds its investor day on January 29, the day after it releases its first-quarter 2026 financial results. 3. Starbucks has reduced its risk in China by forming a joint venture with investment firm Boyu Capital. A slump in the company’s second-largest market has weighed on its stock price this year. But the proceeds from the deal should give management flexibility to ease its stressed balance sheet. We hope that this agreement will stabilize China. (Jim Cramer’s Charitable Trust is a long SBUX. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
