Starbucks (SBUX) Valuation in Focus as Earnings Loom and Growth Challenges Mount

Starbucks (SBUX) is in the spotlight as it prepares to release its fiscal fourth-quarter earnings this week. This period is already filled with major corporate announcements and heightened investor attention.

The coffee chain is facing mounting headwinds, including slower growth in its domestic market, negative comparable sales, and a series of recent U.S. store closures. Competitors such as Dutch Bros and Luckin Coffee have been outpacing Starbucks in same-store sales growth, signaling a more challenging landscape.

See our latest analysis for Starbucks.

Starbucks shares have drifted lower in 2025, with a year-to-date share price return of -7.3% and a one-year total shareholder return of -10%. This performance reflects a tough mix of softer domestic growth and persistent operational headwinds. While management is pushing innovation and navigating labor challenges, momentum has stalled. The market remains cautious until there is clearer evidence of a sustained turnaround.

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With Starbucks shares lagging and uncertainty swirling, investors are left to wonder whether the stock is undervalued in light of recent struggles, or if the market has already priced in the company's future growth prospects.

Most Popular Narrative: 11.6% Undervalued

According to the most widely followed narrative, Starbucks' fair value is calculated at $96.60, implying a meaningful premium to its last close of $85.43. This sets up a compelling discussion about whether the market is still underestimating Starbucks’ future levers for growth and margin improvement.

The Back to Starbucks strategy aims to improve partner engagement and reduce turnover. This is expected to enhance the customer experience and drive higher quality transactions, potentially increasing revenue and net margins. Plans to reestablish Starbucks as a third place by evolving coffee house designs and expanding in attractive growth markets could lead to increased customer visits and improved unit economics, thus boosting revenue.

Read the complete narrative.

Why are analysts betting on Starbucks? The answer rests in bold strategic shifts and ambitious financial projections not usually seen in consumer staples. Want to uncover which future targets fuel this price? Dive in to see what’s driving this high-conviction fair value.

Result: Fair Value of $96.60 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, operating margin pressures from rising labor costs and unmet sales targets could undermine progress. This may keep near-term results and sentiment under watch.

Find out about the key risks to this Starbucks narrative.

Another View: Price-to-Earnings Ratio Sends a Different Signal

Looking through the lens of price-to-earnings, Starbucks is trading at 36.9 times earnings, noticeably higher than the US Hospitality industry average of 24.1 and above its own fair ratio of 34.7. While it appears cheaper than similar peers, this premium suggests investors are paying up for Starbucks’ brand and future potential. Could this higher valuation expose shareholders to risk if growth disappoints?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Starbucks Narrative

If you have a different perspective or want to dig deeper into the numbers yourself, it only takes a few minutes to craft your own point of view. Do it your way

A great starting point for your Starbucks research is our analysis highlighting 1 key reward and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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