Starbucks Is Slipping in 2025. Is a Deeper Drop Ahead?

Starbucks stock (NASDAQ: SBUX) has struggled to keep pace in 2025. The past 12 months has seen the S&P 500 ahead by 14%, while Starbucks has slipped 14%. Given the company’s status as a familiar, resilient consumer name, such a gap raises reasonable questions about what’s driving the weakness.

Before diving in, a quick reminder: if you prefer upside potential with less risk than betting on a single stock, broader approaches like the High Quality Portfolio have outperformed their blended benchmarks by a wide margin. But if you are stock-picking, the question is simple: is Starbucks a buy-on-weakness name, or a stock you should fear right now? Our multi-factor review is pessimistic. A slide toward $65 from today’s $85 level isn’t far-fetched, and several underlying cracks in the fundamentals justify caution. Starbucks shows weak operating performance, fragile downturn behavior, and a valuation that only makes sense if growth is robust—which it isn’t. Additionally, check – Could Akamai Stock Drop 30%?.

Let’s walk through what’s really going on.

Image by Adam Evertsson from Pixabay

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Labor Strain Adds Pressure

Ongoing labor unrest in the U.S. is adding another layer of pressure. Thousands of baristas have staged walkouts over wages, scheduling, and stalled contract talks, raising concerns about higher labor costs and store-level disruptions. While the financial impact isn’t yet clear, the strike reinforces the underlying theme: Starbucks is facing structural challenges at a time when investors are already questioning its growth and valuation.

Valuation: Priced for More Than It Delivers

The market continues to grant Starbucks a premium valuation, but the fundamentals no longer support it. Earnings and cash flow lag the multiples investors are paying, and revenue growth isn’t strong enough to justify a ‘premium brand’ price. Simply put, the stock is still valued like the Starbucks of yesterday, not the slower-growing company of today—a disconnect that signals caution.

Growth: A Slow Drip, Not a Refill

Growth has softened meaningfully.
Over the past three years, Starbucks has managed average annual revenue growth of under 5%. Over the last twelve months, sales improved 2.8%, and in the most recent quarter revenue rose 9.4% year over year – a solid pickup, but not enough to shift the broader trend.

The company still attracts steady demand, but it’s behaving more like a mature packaged-goods business than a global growth story.

Profitability: Middle of the Pack

Margins underscore the same theme. Starbucks’ operating margin sits around 10%, and net margin is roughly 7%—well below market averages. Cash flow remains healthy at nearly $5 billion in operating cash flow over the past year, but profitability isn’t strong enough to justify the stock’s valuation premium.

Higher labor costs, promotional activity, and uneven store-level productivity have contributed to margin pressure. None of this is existential, but it does weaken the investment case.

Financial Stability

Starbucks maintains a solid financial foundation. With roughly $3.5 billion in cash and about $16 billion in total debt, the balance sheet is manageable relative to its $96 billion market cap. Liquidity is sufficient, but the company’s higher leverage is worth noting, especially in a period of slower growth.

Downturn Performance: A Tough Ride Through Storms

The stock has historically fallen harder and taken longer to recover than the broader market across several crises:

• 2022 inflation shock: SBUX fell over 44% versus a 25% drop for the S&P 500 and has not fully regained its prior peak.

• 2020 pandemic: The stock dropped nearly 40%, deeper than the S&P 500’s decline, although it recovered within the year.

• 2008 financial crisis: Starbucks plunged more than 80% peak-to-trough—far worse than the market.

Even outside major crises, the stock has shown vulnerability to earnings resets and business updates. Read SBUX Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

So Should You Buy or Be Afraid?

Is holding Starbucks risky? Yes—but not because the business is collapsing. The core issue is misalignment: the valuation remains elevated, while growth, margins, and historical resilience don’t support that kind of pricing.

Our view: Starbucks looks unattractive at current levels. Weak operating performance and a history of sharp drawdowns suggest investors may get more favorable entry points.