When Starbucks (SBUX.US) appointed Brian Niccol as the new CEO to lead reform efforts in August, Wall Street applauded, causing the company's stock price to rise. Since Niccol's appointment was announced in August, Starbucks' stock price has surged by 28%. Prior to this, the stock had plummeted by over 19%, and was expected to decline for the third consecutive year before rebounding into the positive range. Three months later, the cheers gradually faded.

For example, Edward Lewis, the lead analyst at Redburn Atlantic, advised investors to sell shares of this coffee chain. The institution downgraded Starbucks' rating from "neutral" to "sell," and drastically slashed its target price from $133 to $77, meaning the company's stock price is expected to decline by 22% over the next 12 months from Tuesday's closing price.

In his report on Wednesday, Lewis wrote: 'In our view, the cost of economic recovery is not fully reflected in the consensus. In addition, due to the high expected P/E ratio of the stock, there is hardly any room for error.'

Following another disappointing earnings result announced in October, Niccol revealed his plan to turn Starbucks losses into profits. His strategy involves streamlining the menu, reducing service times, and returning to a more personalized approach by writing customer names on coffee cups.

Lewis stated that since 2017, costs have always been Starbucks' 'Achilles' heel,' with annual store operating expenses exceeding revenue growth. He added that he believes a similar situation may arise now. Lewis mentioned that limited visibility is also a concern after the company withdrew its fiscal year 2025 guidance.

Lewis mentioned that Niccol's experience at Taco Bell and later at Chipotle will buy him time to revitalize Starbucks. Nevertheless, the company Niccol took over has struggled to achieve sustained growth, having withdrawn its long-term profit guidance twice since 2020, with negative comparable sales in the USA for three consecutive quarters since 2020.

Redburn Atlantic is one of the six companies tracked by Bloomberg that recommend selling starbucks stocks, while Niccol, before announcing the recovery plan and latest earnings report, only had three companies.