Is Starbucks Stock a Buy After Its 2026 Turnaround Report?

There was strength across the board this quarter. Comps rose 6.2% on a 3.8% improvement in transactions and a 2.3% rise in the average ticket size. GAAP EPS was $0.45, an increase of 32% year over year, and adjusted EPS was $0.50, a rise of 22%, both ahead of the estimates. North America was strong with comps up 7.1% with traffic growing by 4.4% and ticket by 2.6%. International comps grew 2.6% with positive traffic and ticket trends, and the company pointed out that all of its top 10 international markets experienced positive comp growth for the first time in nine quarters.

Store expansion remained prudent as the company net added 11 stores, bringing the total worldwide stores to over 41,000. The board also declared a quarterly dividend of $0.62 per share, payable on May 29 to shareholders as of May 15.

Guidance

The company raised its fiscal 2026 outlook, anticipating that U.S. and global comps will be up 5% or more versus 3% previously, and again raising adjusted EPS guidance to $2.25–$2.45. The strategic joint venture with Boyu Capital in China, in which Boyu will hold 60% and Starbucks 40% while the brand and IP remain with Starbucks, is also in the offing, which is anticipated to impact reported results from the third quarter.

Management has stated clearly: "We must first reignite the top-line growth of our stores, then we will work to increase our margins." The “Back to Starbucks” program enhances the experience guests receive in stores, renovations of Starbucks stores, increased speed of service, and creating more frequent customer visits.

Sales are happening as a direct result of customers returning to Starbucks stores and through increased transaction activity in North America. North America’s transaction growth is the highest it has been in years. This high level of transaction activity is an important indicator that the company is on the right path toward a sustained recovery.

Along with Starbucks’ newly launched product initiatives and its execution to provide an even lower wait time and higher volume of throughput in its stores, these initiatives will continue to improve labor efficiency while establishing the baseline for margin improvement in its stores.

This tactic follows the turnaround playbook of CEO Brian Niccol (previously of Chipotle Mexican Grill (CMG)): nail the basics, get relevance back, get people back more, and then maximize margin through scaled efficiencies. The company concedes more needs to be done, but the increased comps and traffic combined with a higher full-year guidance point to the strategy bearing fruit.

The shift has been noticed by the market. To date, in 2026, Starbucks stock has gained 25%, compared to 4% for the S&P 500 in the same period. Shares also gained about 5% in after-hours trading post the earnings release. This relative outperformance is a reflection of changing fundamentals and increasing investor confidence that the turnaround is real.

Valuation is the first consideration. By management’s own positioning and terminology, the forward P/E multiple is now in the low-to-mid 30s, which implies a significant piece of the recovery. That premium can be justified if comps, traffic, and productivity continue to trend higher and margins broaden from current levels. It also means that Starbucks stock is more closely tied to execution missteps.

The second focal point continues to be profitability. In spite of accelerating revenue growth, management has indicated margin expansion is a lagging event. Investors should look for store-level unit operating metrics and corporate margins next quarter and into a few quarters ahead to see if higher volumes truly are translating into better profitability. The dividend reinforces the confidence, but it also demands the continued growth in earnings in order to be comfortably covered as the company continues to invest in stores and technology.

Geography and competition round out the risk profile. North America is driving strong traffic gains, but the pace of international growth is more tempered. The China joint venture, by contrast, could improve local flexibility and profit potential but increases integration and reporting complexity in the short term. Competition is still intense as value-driven and convenience-led challengers continue to feast on price-sensitive consumers. The threat of sustained progress will depend on dependable execution, and that is what they are doing.

In a long view, the company has grown over the years. The business has hit its peak for record earnings in this quarter, increased the guidance for future growth, and demonstrated that the company's new "Back to Starbucks" strategy is working—attracting customers back to Starbucks and increasing both customer traffic and sales. Should these trends continue as projected, stock valuation may become more reasonable as earnings eventually catch up, providing support to those investors willing to pay for an extremely high-quality global brand currently in the midst of a turnaround.

The risk factor for those looking to enter the Starbucks market is still dependent on whether management can execute on new business initiatives. Those investors focused primarily on seeing a margin increase before getting into an investment are better suited waiting for additional improvement and an increase in international sales over a few quarters or hoping for some sort of market pullback to limit their entry risk. Long-term investors who are satisfied with the long-term direction of the company, the strength of the Starbucks brand, and the revenue-first plan may want to gradually establish or build their position as they monitor company margins, execution of the Starbucks China joint venture, and the sustainability of increased traffic in coffee shops.

Year to date, Starbucks has definitely turned the corner from declining sales and profits to showing a credible recovery, as evidenced through record revenue in the most recent quarter, earnings that exceeded expectations, and a positive raised outlook. Investors who are evaluating the potential investment in Starbucks stock will find there is a real opportunity to invest with good long-term potential, but there is also a risk as the valuation and execution of the company's new direction will be critical to monitor over the next few quarters.