How Can Starbucks Stock Fall 50%?

Starbucks stock (NASDAQ: SBUX) has already slipped about 15% over the past year—but the real question for investors is whether the pain has only just begun. History suggests it might. In past downturns, Starbucks has consistently fallen harder than the broader market: during the 2021–23 inflation shock, the stock plunged 44% while the S&P 500 lost just 25%. It tumbled 40% during Covid versus a 34% drop for the index, and in the financial crisis, it cratered 80% compared to the S&P’s 57% slide.

So, could Starbucks really lose another half of its value from here? We think the risk is real. Three pressure points—revenue growth, margin compression, and stretched valuation—could converge to push shares toward $40, about 50% below current levels.

Of course, this doesn’t mean Starbucks is without long-term recovery potential. But given its track record, present fundamentals, and how it stacks up against peers, the downside case deserves careful attention. That said, investing in a single stock carries high risk. The Trefis High Quality Portfolio is designed to reduce stock-specific risk while giving upside exposure. Separately see, Tempus AI: TEM Stock To $400?

Image by Adam Evertsson from Pixabay

Revenue Growth Can Stall

Over the past three years, Starbucks has delivered average revenue growth of about 4.7%. In the last twelve months, sales edged up 0.6%, rising from $36 billion to $37 billion. Most recently, quarterly revenue increased 3.8% year-over-year, reaching $9.5 billion compared with $9.1 billion in the same period a year ago.

The problem lies beneath the headline: same-store sales were down 2% globally in the recent quarter, with global transaction volumes also falling about 2% and North America down 3%. Price increases masked that traffic weakness, but that lever is nearing its limit as consumers push back. If transactions decline another 2–3% and pricing power softens, revenues could slip into negative territory. At a $37 billion revenue base, a modest 2% contraction would erase roughly $750 million in annual sales—more than enough to pressure profitability. For more details see: SBUX Revenue Comparison

Margins Can Contract Further

That’s where the revenue slowdown feeds directly into margins. Starbucks operates with high fixed costs, so weaker traffic makes it harder to absorb rising expenses. Over the last 12 months, the company earned $3.8 billion in operating income, translating to a margin of just 10.5%. Net income was about $2.6 billion, a slim 7.2% margin.

The pressure is mounting. Operating margins, once above 20% in North America, have slipped closer to 13%. Several cost drivers are at play: labor expenses have risen 6–8% annually as Starbucks lifts wages to address union pressures; coffee bean prices are up nearly 15% year-over-year (as of July), with dairy costs also elevated; and the “Back to Starbucks” reinvestment plan is expected to add over $3 billion in spending over three years, a drag on near-term profitability. Delivery and digital sales now represent more than 25% of transactions, but carry lower margins due to third-party fees. Lower revenues on thinner margins are a recipe for valuation risk.

Path to $40?

Starbucks stock, now trading near $83, looks vulnerable to a sharp reset if fundamentals don’t improve. Revenue growth has slowed with declining traffic in North America and an uneven international recovery. Margins are also under pressure, with EPS expected to fall from $3.31 in FY 2024 to just $2.20 in FY 2025, before a partial rebound to $2.71 in FY 2026—a trajectory that still reflects weaker profitability than in prior years.

Yet the stock continues to trade at lofty multiples of 37x forward earnings for FY 2025 and 30x for FY 2026, far above mature consumer peers like Coca-Cola (NYSE:KO) (24x) or McDonald’s (NYSE: MCD) (26x). If revenues remain sluggish, margins stay compressed, and the market re-rates Starbucks to a more realistic 18–20x earnings multiple, shares could easily fall into the $40–50 range. That would represent a 40–50% decline over the next one to two years.

Timing is uncertain. This downside risk could unfold over two years or longer if sales and margins keep slipping while rivals strengthen their position. The upcoming few quarter results will be an early test: signs of stabilization in same-store sales or margins could ease pressure, but persistent weakness would likely deepen investor skepticism. Still, Starbucks retains meaningful long-term advantages. Its global scale, premium brand, and powerful loyalty program give it pricing power, cultural relevance, and international growth potential that few peers can match. A recovery is possible, though investors may need patience and a longer time horizon to see it play out.

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