Now is not the time to buy Starbucks stock

We believe there are a few things to fear in SBUX stock given its overall Weak operating performance and financial condition. In addition, keeping in mind its High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $107 Bil in market cap, Starbucks provides specialty coffee and tea beverages, roasted beans, and ready-to-drink products through a global network of company-operated and licensed stores.

[1] Valuation Looks High

This table highlights how SBUX is valued vs broader market. For more details see: SBUX Valuation Ratios

[2] Growth Is Inconsistent

• Starbucks has seen its top line grow at an average rate of 5.2% over the last 3 years
• Its revenues have fallen -0.5% from $37 Bil to $36 Bil in the last 12 months
• Also, its quarterly revenues grew 2.3% to $8.8 Bil in the most recent quarter from $8.6 Bil a year ago.

This table highlights how SBUX is growing vs broader market. For more details see: SBUX Revenue Comparison

[3] Profitability Appears Moderate

• SBUX last 12 month operating income was $4.4 Bil representing operating margin of 12.1%
• With cash flow margin of 15.3%, it generated nearly $5.6 Bil in operating cash flow over this period
• For the same period, SBUX generated nearly $3.1 Bil in net income, suggesting net margin of about 8.6%

This table highlights how SBUX profitability vs broader market. For more details see: SBUX Operating Income Comparison

[4] Financial Stability Looks Strong

• SBUX Debt was $26 Bil at the end of the most recent quarter, while its current Market Cap is $107 Bil. This implies Debt-to-Equity Ratio of 24.1%
• SBUX Cash (including cash equivalents) makes up $3.0 Bil of $32 Bil in total Assets. This yields a Cash-to-Assets Ratio of 9.5%

[4] Downturn Resilience Is Weak

SBUX has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• SBUX stock fell 44.4% from a high of $126.06 on 26 July 2021 to $70.06 on 11 May 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $115.81 on 2 March 2025 , and currently trades at $92.45

 
2020 Covid Pandemic

• SBUX stock fell 39.9% from a high of $93.75 on 23 January 2020 to $56.33 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 9 November 2020

 
2008 Global Financial Crisis

• SBUX stock fell 80.2% from a high of $18.14 on 17 January 2007 to $3.58 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 March 2011

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read SBUX Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.