Analyst Shifts Stance: Wolfe Research Downgrades Starbucks, Bets on Brinker and Wingstop for Growth
In a notable shift for the restaurant sector, Wolfe Research analyst Greg Badishkanian issued a split decision this week, downgrading coffee giant Starbucks to Peer Perform from Outperform while turning bullish on Brinker International and Wingstop. The moves underscore a growing divide on Wall Street between companies navigating complex turnarounds and those seen as having resilient, growth-oriented models.
Starbucks (NASDAQ:SBUX) found itself on the defensive. Wolfe removed its Outperform rating, opting not to assign a new price target. The firm acknowledged early "green shoots" in the company's ongoing strategic overhaul but stated it needs to see evidence of sustained execution and margin recovery before turning positive again. An increasingly crowded and competitive coffee landscape was also cited as a persistent headwind.
The downgrade comes despite a mixed quarterly report. Starbucks' Q1 FY2026 revenue of $9.92 billion beat estimates, growing 5.5% year-over-year, with global comparable store sales up 4%. Notably, U.S. comparable transaction growth turned positive for the first time in two years. "Our strategy is working, and working ahead of schedule," CEO Brian Niccol asserted. However, non-GAAP earnings per share of $0.56 fell short of consensus, and GAAP operating margin contracted significantly to 9.0%, with net income plunging over 62% from the prior year.
The broader analyst community remains cautious. The consensus price target for SBUX sits at $100.44, backed by a mix of 13 Buy, 14 Hold, and 4 Sell-equivalent ratings. Trading around $96.93, the stock's 17% year-to-date gain may have led Wolfe to see limited near-term upside without clearer proof of a financial turnaround.
In contrast, Brinker International (NYSE:EAT), parent company of Chili's Grill & Bar, was upgraded to Outperform with a $184 price target. Wolfe highlighted the chain's "earned value credibility" and consistent traffic gains in a challenging environment.
The confidence appears well-founded. Chili's has now posted 19 straight quarters of same-store sales growth. Its Q2 FY2026 comps surged 8.6%, contributing to a robust two-year stack of 43%. The company also beat earnings estimates and raised its full-year EPS guidance, demonstrating resilience even after absorbing a $20 million revenue hit from severe winter weather. Wall Street consensus is strongly positive, with 16 Buy ratings, no Sells, and an average target of $189.25.
Meanwhile, Wingstop (NASDAQ:WING) was initiated with an Outperform rating and a $320 price target. Wolfe praised the chicken wing chain's best-in-class unit growth, driven by franchisees with both the capital and conviction to expand aggressively. The firm found it "encouraging" that franchisee commitment remains high despite a recent softening in same-store sales.
Wingstop's expansion narrative is powerful. The company opened a record 493 net new restaurants in FY2025, achieving 19.2% unit growth. While domestic same-store sales declined last year, adjusted EBITDA still grew 15%, underscoring the strength of its unit economics. Guidance for FY2026 anticipates a return to flat or slightly positive domestic comps alongside 15-16% global unit growth. The analyst consensus echoes Wolfe's optimism, with 24 Buy ratings and a $325.66 average target.
Market Voices:
"This is a classic case of momentum versus malaise," says David Chen, a portfolio manager at Horizon Capital. "Brinker and Wingstop have demonstrable growth algorithms. Starbucks' story is about fixing problems, which is inherently harder and carries more uncertainty."
"The downgrade on Starbucks feels overly reactive to one messy quarter," argues Sarah Miller, a consumer staples analyst. "Their traffic turned a crucial corner. If they can stabilize margins, this call will look premature."
"Finally, someone is calling out the emperor's new clothes," states Michael Rostov, a vocal financial blogger known for his critical takes. "Starbucks has been resting on its brand laurels for years while its core product became a commodity. This downgrade is long overdue. The real growth is in value and experience, which is where Brinker and Wingstop are executing."
"Wingstop's model is incredibly capital-light and scalable," notes Priya Sharma, a franchise business consultant. "The stock's recent pullback seems more like a buying opportunity for long-term investors, given the unit growth trajectory and franchisee health."