Starbucks, Chipotle Eye 15% Upside: RBC's Bullish Outlook

RBC Capital Markets analysts have upgraded both Starbucks and Chipotle, predicting a 15% upside for the companies following the appointment of Chipotle CEO Brian Niccol as the new Starbucks CEO. Niccol's successful turnaround of Chipotle, where he increased comparable sales by 11% in the latest quarter, suggests potential synergies between the two companies.

Niccol's operational expertise, digital savvy, and focus on brand quality could drive improvements in Starbucks' operations, particularly in simplifying complex drink orders and reducing wait times. However, Niccol faces challenges such as navigating inflation-wearied consumers, tougher competition in China, union negotiations, and Schultz's critiques.

Chipotle's new CEO faces both challenges and opportunities in maintaining the company's growth momentum. On the positive side, Chipotle has shown resilience this year, with comparable sales increasing 11% in its latest quarter. However, the new CEO must navigate a more challenging macro backdrop for restaurants and maintain the company's market share gains.

Starbucks' shareholders may react positively to Niccol's appointment, given his successful turnaround of Chipotle. However, shareholders should also consider potential risks, like Niccol's focus on fixing problems and his compensation, which was 1,354 times the median employee's pay at Chipotle.

RBC's 15% upside prediction for Starbucks and Chipotle is likely influenced by several macroeconomic factors. Firstly, the U.S. economy's resilience, despite global headwinds, boosts consumer spending on discretionary items like food and beverages. Secondly, the ongoing shift towards digital ordering and delivery, accelerated by the pandemic, benefits both companies' omnichannel strategies. Lastly, the potential for these companies to expand their market share, particularly in international markets, contributes to their growth prospects.



In conclusion, RBC's bullish outlook on Starbucks and Chipotle suggests that investors may see a 15% upside in the coming months. Niccol's appointment as Starbucks' CEO brings operational expertise and a track record of success to the coffee giant. However, both companies face challenges that their new leadership must navigate to maintain their growth momentum. A balanced approach, considering both opportunities and risks, is essential for investors to capitalize on the potential upside in these companies.