Freedom Broker proposed earning 135.3% on Starbucks’ recovery

Freedom Broker analysts suggested buying a call option on Starbucks Corp. (SBUX) shares, betting on the coffee chain’s business recovery continuing. If the option price rises from $4.25 to $10, the expected return on the trade would be 135.3%, or $575 per contract. 

Read more in the new investment review from Freedom Broker experts.

What Starbucks does

Starbucks Corp. is the world’s largest coffeehouse chain, comprising more than 41 thousand locations. The company operates company-owned and licensed stores and develops digital services and a loyalty program.

Freedom Broker’s investment idea involves buying an SBUX call option with a $100 strike price and an expiration date of December 18, 2026. A call option gives an investor the right to buy shares at a pre-set price. Analysts expect that if the current trend holds, Starbucks shares could reach the $110–115 range. The target for the option itself is set at $10 versus a $4.25 premium when entering the position.

Traffic recovery supports the investment idea

Freedom Broker cites improving operating metrics at Starbucks as the main argument in favor of the trade. In the third quarter of fiscal 2026, the company recorded growth in customer traffic, comparable sales, and profitability, and management raised its guidance.

Starbucks’ global comparable sales increased by 7.9%, while the number of transactions rose by 4.2%. Adjusted operating margin reached 14.4%. In analysts’ view, this momentum supports expectations for a further recovery in profitability.

An additional factor was the pullback in the stock toward the $100 area, which improved the entry point for the trade. A decline in coffee prices could also support margins.

Revenue reached $9.32 billion

In the third quarter of fiscal 2026, revenue at Starbucks totaled $9.32 billion, down 1.4% year over year. The figure nevertheless exceeded the market consensus forecast of $9.18 billion. The decline was mainly due to the sale of a stake in the China business. Comparable sales in North America rose 8.1%, and in international markets, 5.7%.

Net income attributable to Starbucks shareholders jumped 87% to $1.05 billion, or $0.91 per share. Adjusted earnings per share came in at $0.85 versus the market expectation of $0.66. Operating cash flow increased 25% to $1.64 billion, and free cash flow reached $1.35 billion. Total debt fell 12% quarter over quarter to $13.28 billion.

Starbucks raised its 2026 outlook

The company expects global comparable sales in fiscal 2026 to increase by at least 6%. The adjusted earnings forecast was raised to $2.55–2.65 per share. Starbucks also plans to open 600–650 new coffeehouses.

The improvement comes amid implementation of the Back to Starbucks program. The strategy calls for returning the company to the brand’s core principles: improving service quality, reducing wait times, and optimizing the menu.

Previously, Freedom Broker experts raised their target price for Starbucks shares to $115 while maintaining a “Hold” recommendation. At a price of $105.25 at the time of the August analysis, the upside potential was 9.3%. The new options idea offers the prospect of higher returns, but also implies significantly higher risk.

What risks Freedom Broker considers

The main risk is that the recovery in customer traffic could slow and margin improvement could prove weaker than expected. High prices for coffee beans and other raw materials could also weigh on results.

Starbucks continues restructuring

In spring 2026, Starbucks continued restructuring its business. The company announced it would cut 300 office employees in the U.S. and close some regional offices. The costs of the program are estimated at about $400 million, including $280 million in non-cash asset write-downs and $120 million in payments related to workforce reductions.

Starbucks also completed the sale of a stake in its China business to Boyu Capital and received about $3.1 billion pre-tax. The company planned to use the proceeds to reduce its debt burden.

Not an individual investment recommendation.