Morgan Stanley analyst Brian Harbour raised his 12-18 month price target on Starbucks (SBUX) to $116 from $115. The upgrade came after the coffee chain’s fourth-quarter results showed customers are spending more each time they walk into a store.

The Q4 results showed that the average amount customers pay per U.S. Starbucks visit increased by 5.2%. The number of customers that visited a U.S. store also grew by 2.4%. SBUX has done well in 2026, and its shares closed at $103.67 on Oct. 30, up about 23% year to date.

Morgan Stanley lifts its Starbucks price target as margins finally come through

Harbour, who covers restaurant stocks at Morgan Stanley, called Starbucks’ fourth quarter the clearest sign yet that CEO Brian Niccol‘s “Back to Starbucks” plan is turning growth into profit.

In a Morgan Stanley note shared with me, Harbour wrote that “4Q offered a better read on underlying margin improvement.” He noted this because Starbucks’ adjusted operating margin expanded 450 basis points year over year to 14.0%, surpassing the 12.7% analysts had expected.

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Starbucks’ turnaround needed its margins to catch up to sales before its premium multiple made sense. The fourth quarter finally delivered that. In addition, the company’s adjusted earnings per share hit $0.80, beating the $0.72 Wall Street expected.

Because of the strong performance, Niccol told investors on the Oct. 29 earnings call that Starbucks is “ahead of schedule” on its fiscal 2028 goals.

What a bigger Starbucks ticket size means for shareholders

Starbucks locations in the U.S. got that 5.2% increase in ticket size from two main places. About half came from higher prices and delivery fees, and the other half from customers spending more on items in a single visit, like adding a sandwich to a latte or switching to pricier menu items.

According to Starbucks’ SEC filing, Espresso, Refreshers, and matcha especially drove the product mix, as people frequently added food to their orders.

When customers add food to their order or choose a pricier drink, Starbucks makes more money without really spending more to get it. And most of that extra money becomes profit.

The risks that could still slow Starbucks’ recovery

Some things could still slow down Starbucks’ recovery plan. Starbucks guided its fiscal 2027 revenue forecast to be 1% lower than in 2026, which puts it at about $37.5 billion.

Investors usually don’t like to see reduced guidance, but there are two main reasons.

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Earlier this year, Starbucks sold most of its China business to a local partner, so those stores no longer count in its sales. Also, Niccol is still closing underperforming stores in the U.S., something he has been doing since he began in his role.

Morgan Stanley also included a bear case in its note. For the bear case, the firm prices the stock at $69, which is roughly 34% below the Oct. 30 close. Conditions that could lead to the bear case are softening consumer spending, fading pricing power, and flattening comps.

What to watch before adding more Starbucks shares

Morgan Stanley expects comp growth of about 5% in the first quarter of fiscal 2027, and SBUX already trades at roughly 33 times forward earnings, which is above its historical average. If customers spend less per visit and transaction volume doesn’t rise, that multiple may not hold.

If you’re thinking about buying SBUX for the first time, consider buying in bits over several months instead of all at once.

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