Starbucks SBUX analysts are mixed Tuesday on what the addition of Brian Niccol, previously CEO and Chairman of Chipotle Mexican Grill CMG, could mean for the coffee chain.
The Starbucks Analysts: Wedbush analyst Nick Setyan maintained a Neutral rating on Starbucks with an $80 price target.
Baird analyst David Tarantino upgraded Starbucks from Neutral to Outperform and raised the price target from $81 to $110.
Wedbush On Starbucks: Niccol's move from Chipotle to Starbucks might not be as straightforward as his move from Taco Bell to Chipotle, Setyan said in a new investor note.
"Confidence in Brian Niccol (is) understandable, but Starbucks is no Chipotle," the analyst said.
The analyst calls moving to Starbucks "a different ballgame," adding that Niccol’s familiarity with Taco Bell meant his earlier move to Chipotle made sense.
"CMG has never embraced menu innovation, marketing of any kind, and was an even more straightforward business model than Taco Bell's franchised one."
Niccol helped Chipotle re-engage with its customers, Setyan said.
"Starbucks is a global business with years of history of product innovation, brand positioning, throughput initiatives, digital innovation, etc."
At Starbucks, Niccol could be tasked with connecting with a new customer, the analyst said.
The jump in Starbucks' stock price Tuesday was termed "premature" by the analyst.
With the departure of Niccol, Setyan said he remains confident that Chipotle is in good hands. The company's COO Scott Boatwright will serve as the interim CEO. Boatwright has served as the company's COO since 2017 and was instrumental in the company's turnaround, the analyst said.
Read Also: Starbucks Q3 Earnings: Revenue Miss, EPS In Line, Comps Down 3%, ‘Action Plan Is Beginning To Work’
Baird On Starbucks: The new CEO hire creates a more favorable risk-reward for Starbucks stock going forward, Tarantino said.
"While we acknowledge continued near-term risks related to the external operating environment, we believe Niccol brings a skill set that will prove valuable in strengthening internal operating fundamentals for the company, and set the stage for healthier growth in the years ahead," the analyst said.
The sentiment around Starbucks stock should remain positive over the next few quarters, even if financial results are "lackluster,” he said.
"We view Niccol as an exceptional executive based on his track record in driving robust results at Chipotle since he arrived in 2018, as well as his successful stints at YUM (including as CEO of Taco Bell) and Procter & Gamble."
Niccol can leverage his brand management expertise to launch initiatives for Starbucks that could boost the financial performance, Tarantino said.
Other Starbucks Takes: The hiring of Niccol by Starbucks could help the company with new products and advertising, said R.J. Hottovy, Placer.ai's head of analytical research.
Chipotle increased revenue by 14.1% and 18.2% year-over-year in the first and second quarter, respectively, compared to Starbucks' revenue falling 2% and 1%, respectively, in the first and second quarters on a year-over-year basis, Hottovy said.
"Brian Niccol has earned the reputation as one of the top innovators in the restaurant industry today. Niccol's ability to drive visits was apparent during his time at both Taco Bell and Chipotle, spurred by new menu innovations, engaging marketing campaigns, and improved restaurant operations.”
Data from Placer.ai shows Chipotle's foot traffic has outperformed Starbucks and the overall quick service restaurant sector in recent months. Here's a look at July foot traffic at restaurant locations.
| Week | Chipotle | Starbucks | QSR Sector |
| July 1 | +9.9% | +0.1% | +3.6% |
| July 8 | +12.8% | +1.5% | +2.6% |
| July 15 | +12.9% | -7.9% | +3.6% |
| July 22 | +12.7% | -12.9% | +3.8% |
| July 29 | +13.4% | -12.5% | +3.3% |
Activist investor Elliott Management, which has been building a stake in the coffee chain, shared a statement on the CEO move Tuesday.
"Elliott has been engaged with Starbucks' Board over the past two months regarding our perspectives on the Company's key issues and we view today's announcement as a transformational step forward for the Company," Elliott Management said. "We welcome the appointment of Brian Niccol, and we look forward to continuing our engagement with the Board as it works toward the realization of Starbucks' full potential."
Elliott Management said it has confidence in long-term value-creation by Starbucks, calling the company "one of the world's most important brands."
Niccol took over as the CEO of Chipotle on March 5, 2018. Based on a split-adjusted price of $6.40 at open on Niccol's first day at the restaurant company, Chipotle shares are up 650.8% since that date as of Tuesday morning.
SBUX, CMG Price Action: Starbucks shares are up 23% to $94.83 on Tuesday versus a 52-week trading range of $71.55 to $107.66. Starbucks stock is down 1.2% year-to-date in 2024.
Chipotle stock is down 14% to $48.05 on Tuesday versus a 52-week trading range of $35.37 to $69.26. Chipotle shares are up 5.1% year-to-date in 2024.
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