11:09 AM EDT, 07/30/2025 (MT Newswires) -- Starbucks' ( SBUX ) underlying business improvement and narrative are driving the stock, Morgan Stanley said in a Wednesday research report.

Cost of goods sold showed pressure in Q3, and it should ramp into early 2026 due to coffee but ease by H2. The company's Green Apron Service Model deployment is imminent next month and has been expedited for the US company store base, which could be a positive indicator, analysts wrote.

Staffing and training to support the launch are underway to reduce any potential disruption from the operational change across US stores, according to Morgan Stanley.

"The view on FY26 clearly aims for more innovation, news and rewards program refinement. It seems like the company is planning to be on offense next year once its new operating model is in place," the brokerage stated.

The company believes its labor investments and efforts to lower store remodeling costs will improve unit economics and unlock more markets. However, the brokerage lowered its Q4 North America same-store sales forecast to flat from 2% earlier on lower transactions.

While the 2026 same-store-sales forecast was unchanged, Morgan Stanley lowered its EPS forecast for Q4 to $0.61 from $0.65 and to $2.73 from $2.76 for 2026.

The brokerage said it reiterated its overweight rating on the stock and boosted its price target to $103 per share from $95.

Price: 91.26, Change: -1.70, Percent Change: -1.83