Starbucks (SBUX -0.45%) is energizing investors' portfolios. Shares have climbed 24% so far in 2026, as of July 21. Should this positive trend hold up throughout the rest of the year, the business will put together its first gain since 2021. That's welcome news for investors who have gotten used to ongoing declines.
It's also noteworthy that this coffee stock is on track to beat the Nasdaq-100 index for the first time since 2022. Outperforming a well-known technology benchmark would certainly be a winning outcome.
Does Starbucks have more room to run?
Image source: The Motley Fool.
Traffic trends are encouraging
It wasn't that long ago when Starbucks was really struggling. Customers grew displeased with a worsening store experience, complex menus, and ongoing price increases, which all contributed to weaker traffic. The intensely competitive nature of the retail coffee market didn't make things easier.
The company reported declining year-over-year same-store sales in both fiscal 2024 and fiscal 2025. Since this metric is critical for any retailer or restaurant, as it indicates the productivity of each location, it's no wonder the stock was under pressure.
The situation has improved. Traffic trends have been encouraging. In April, Starbucks reported its financial results for Q2 2026, ended March 29. And the management team revealed that global comparable transactions were up for a second straight quarter.
"Our US company-operated business grew transactions across all day parts," CEO Brian Niccol said on the Q2 2026 earnings call.
Starbucks is working to right the ship. The company's key priorities have been to re-establish cafes as a welcoming "Third Place," while boosting store operations with better staffing and equipment. Starbucks also innovated with new menu offerings to capture more sales during the afternoon.
The Starbucks rewards program has been updated, too. It now features membership tiers based on different spending levels, aiding in personalization and providing more benefits to the most loyal customers. This setup supports engagement and frequency. There are now a record 35.6 million members in the United States.
Starbucks set out to reduce its annual expenses by $2 billion, and there appears to be progress in this regard. The business raised its full-year profit guidance, now forecasting adjusted earnings per share of $2.25 to $2.45. At the midpoint, that implies a 10% year-over-year jump.
The turnaround isn't over, though. Getting back to healthy growth is the main goal. At Starbucks' investor day meeting in January this year, management laid out a target to achieve a 5% year-over-year revenue gain by fiscal 2028. The top line is expected to be flat in fiscal 2026, so there is still work to do.
NASDAQ: SBUX
Key Data Points
Should you buy the coffee chain's shares today?
Starbucks is a high-quality business. It has a wide economic moat that's supported by an incredible brand and tremendous scale. These two traits, which have driven success in the past, give Starbucks a durable advantage in the crowded industry.
Another bullish argument focuses on the company's profit outlook. Starbucks' adjusted EPS will grow at a compound annual rate of 19.8% between fiscal 2025 and fiscal 2028, according to consensus analyst estimates. That's an encouraging outlook.
But investors should remember that this bottom-line forecast isn't on solid ground. Starbucks is still in the middle of a turnaround that can present new challenges. Plus, the macroeconomic environment could weaken, pressuring demand for the premium food and beverage that Starbucks offers.
In addition, the valuation is expensive. The consumer discretionary stock trades at a forward price-to-earnings ratio of 35.6. There is no margin of safety, adding greater downside risk to the equation. So this isn't a stock I'm thinking of buying.
Income investors, however, will have a different perspective. Starbucks' current dividend yield of 2.37% is more than double what the S&P 500 index offers. That payout has increased by 210% in the past decade. And Starbucks has paid a dividend for an impressive 66 straight quarters. T
