Starbucks Coffee in Warsaw, Poland on September 16th, 2025. (Photo by Beata Zawrzel/NurPhoto via Getty Images)
NurPhoto via Getty Images
Starbucks stock (NASDAQ: SBUX) has already decreased by approximately 15% over the last year—but the pivotal question for investors is whether the decline has only just started. Historical data indicates that it could be a possibility. In previous downturns, Starbucks has routinely suffered more significant losses than the overall market: during the 2021–23 inflation shock, the stock fell 44% while the S&P 500 dropped only 25%. It dropped 40% during Covid compared to a 34% decrease for the index, and in the financial crisis, it collapsed by 80% against the S&P’s 57% decline.
Therefore, is it possible for Starbucks to lose another half of its value from this point? We believe the risk is substantial. Three critical issues—revenue growth, margin compression, and inflated valuation—could come together to drive shares down to $40, roughly 50% below current prices.
Of course, this doesn’t imply that Starbucks lacks long-term recovery potential. However, considering its history, current fundamentals, and how it compares to competitors, the negative outlook deserves thorough scrutiny. That said, investing in an individual stock entails significant risk. The Trefis High Quality Portfolio is designed to mitigate stock-specific risk while offering upside exposure. Refer to Tempus AI: TEM Stock To $400?
Revenue Growth Can Stall
In the last three years, Starbucks has achieved an average revenue growth of around 4.7%. In the past year, sales increased by 0.6%, rising from $36 billion to $37 billion. Most recently, quarterly revenue rose 3.8% year-over-year, hitting $9.5 billion compared to $9.1 billion during the same period last year.
The concern lies beneath the surface: same-store sales experienced a global decline of 2% in the most recent quarter, with global transaction volumes also decreasing by about 2% and a 3% drop in North America. Price hikes masked the decline in traffic, but that option is nearing its limit as consumers begin to resist. If transactions decrease an additional 2–3% and pricing power diminishes, revenues could fall into negative territory. With a revenue base of $37 billion, a small 2% contraction would result in roughly $750 million less in annual sales—more than sufficient to pressure profitability. For more information, see: SBUX Revenue Comparison
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Margins Can Contract Further
This is where the slowdown in revenue directly impacts margins. Starbucks operates with high fixed costs, making it more challenging to absorb rising expenses when traffic weakens. Over the last year, the company achieved $3.8 billion in operating income, leading to a margin of just 10.5%. Net income was approximately $2.6 billion, resulting in a slim 7.2% margin.
The pressure is increasing. Operating margins, which were previously above 20% in North America, have fallen closer to 13%. Several factors are contributing to increased costs: labor expenses have surged 6–8% per year as Starbucks raises wages to respond to union pressures; coffee bean prices have increased nearly 15% year-over-year (as of July), with dairy costs also remaining high; and the “Back to Starbucks” reinvestment strategy is projected to require over $3 billion in spending across three years, impacting near-term profitability. Delivery and digital sales now account for more than 25% of transactions but yield lower margins due to third-party fees. Decreased revenues coupled with tighter margins create a scenario ripe for valuation risk.
Path to $40?
Currently priced near $83, Starbucks stock appears vulnerable to a significant reset if fundamentals do not improve. Revenue growth has slowed down due to decreasing traffic in North America and an inconsistent international recovery. Margins are also being squeezed, with EPS projected to decline from $3.31 in FY 2024 to just $2.20 in FY 2025, before partially recovering to $2.71 in FY 2026—a trend that still indicates weaker profitability compared to previous years.
Nevertheless, the stock continues to trade at high multiples of 37x forward earnings for FY 2025 and 30x for FY 2026, significantly higher than mature consumer peers such as Coca-Cola (NYSE:KO) (24x) or McDonald’s (NYSE: MCD) (26x). Should revenues continue to stagnate, margins remain compressed, and the market reassesses Starbucks at a more realistic earnings multiple of 18–20x, shares could easily drop into the $40–50 range. This would signify a 40–50% decline over the forthcoming one to two years.
Timing remains uncertain. This risk of downside could play out over two years or more if sales and margins continue to decline while competitors strengthen their foothold. The upcoming few quarterly results will serve as an initial test: any signs of stabilization in same-store sales or margins could alleviate pressure, whereas ongoing weakness would likely intensify investor doubt. Yet, Starbucks maintains significant long-term advantages. Its global scale, premium brand, and effective loyalty program provide it with pricing power, cultural significance, and international growth potential that few competitors can rival. A recovery is feasible, although investors may need to exercise patience and adopt a longer time horizon to witness it unfold.
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