QS Research · Michael Burry's Scion Capital analyst template · 2006
STARBUCKS CORP (SBUX)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case -9% · downside -34% · upside +23%
The market is not missing the Starbucks turnaround; it has already paid for much of it. At $105.41, my 22x downside on FY2027 low guidance is $69.30 (-34.3%), my 30x base on the $3.20 midpoint is $96.00 (-8.9%), and my 40x upside on the high end is $130.00 (+23.3%). I use a 22x-40x forward P/E range rather than the 60.6x TTM P/E because the TTM figure is struck on gain-inflated, depressed GAAP earnings; the FY2027 guidance and margin recovery are the catalyst for that rerating. The business is visibly better, with Q4 FY2026 comps +7.2% and non-GAAP EPS $0.80 (+54%), but the price already discounts a successful FY2027. I would watch, not buy, until the stock offers a margin of safety or FY2027 delivery proves the margin recovery can support a higher multiple.
Key numbers
- Share price: $105.41
- Market cap: $120.17B
- Latest financial period: TTM to Jun 28, 2026
- Revenue (TTM): $38.34B
- EV / EBITDA (TTM): 28.3x
- P/E (TTM): 60.6x
The 15 boxes
- ✓ 1. Long-form business notes
Starbucks in FY2025 is a 40,990-store, $37.18B-revenue coffee retailer that earns most of its money at company-operated counters (83% of FY2025 net revenues; 52% of stores) and the rest from licensed stores (12% of revenues; 48% of stores) plus a Channel Development royalty/packaged-goods business (5% of revenues, down from 8% in FY2020). Between the FY2020 and FY2025 10-Ks the store base grew from 32,660 to 40,990 with growth concentrated in China company-operated units (+415 net in FY2025 to 8,009) while the U.S. company-operated base shrank by a net 111 stores to 10,047, including 627 closures in Q4 FY2025 under the announced restructuring. The business changed direction, not just size: the FY2024 "Back to Starbucks" reset and the Q4 FY2025 restructuring plan replaced the FY2020 emphasis on new formats (Starbucks Pickup, Starbucks Now), and FY2025 operating income of $2.94B and net income of $1.86B sit well below FY2024's $5.41B and $3.76B.
- ✓ 2. Competitive advantage
SBUX has a durable brand and trademark portfolio, a global footprint and positive operating cash flow, but the provided history does not show a stable margin advantage: FY2025 operating income fell to $2.94B even as revenue rose to $37.18B. Competition is broad across specialty coffee, quick-service restaurants, ready-to-drink coffee and retail channels, and the 10-K itself flags brand-erosion risk. Negative total equity in every year shown makes book return measures unhelpful, so the case rests on brand and scale plus cash generation, not on demonstrated cost or capital returns.
- ✓ 3. 10-Q takeaways
Q3 FY26 (quarter ended June 28, 2026) net revenues fell 1.4% to $9,322.7 million because the China retail business converted to a licensed joint venture, while global comparable store sales rose 7.9% (North America +8.1%, U.S. +7.9%) on transaction growth. GAAP operating margin expanded 60 bps to 10.5% and non-GAAP to 14.4% (+430 bps), with $302.6 million of restructuring and impairments sitting inside the GAAP figure; GAAP EPS of $0.91 includes a $536.3 million divestiture gain, non-GAAP EPS was $0.85. Cash was $3,449.8 million at June 28, 2026 while long-term debt fell to $11,780.2 million from $14,575.9 million after roughly $1.3 billion of note tenders. FY26 guidance was raised: revenue flat to slight growth, non-GAAP operating margin above 11.0%, non-GAAP EPS $2.55 to $2.65.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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