3 Reasons SBUX is Risky and 1 Stock to Buy Instead

Since July 2025, Starbucks has been in a holding pattern, posting a small loss of 4.9% while floating around $88.82. The stock also fell short of the S&P 500’s 10.4% gain during that period.

Is there a buying opportunity in Starbucks, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Do We Think Starbucks Will Underperform?

We're sitting this one out for now. Here are three reasons you should be careful with SBUX and a stock we'd rather own.

1. Shrinking Same-Store Sales Indicate Waning Demand

Same-store sales is a key performance indicator used to measure organic growth at restaurants open for at least a year.

Starbucks’s demand has been shrinking over the last two years as its same-store sales have averaged 1.9% annual declines.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Starbucks’s revenue to rise by 3.1%, a slight deceleration versus This projection is underwhelming and indicates its menu offerings will see some demand headwinds.

3. Shrinking Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Analyzing the trend in its profitability, Starbucks’s operating margin decreased by 7.1 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 7.9%.

Final Judgment

Starbucks doesn’t pass our quality test. With its shares lagging the market recently, the stock trades at 37.2× forward P/E (or $88.82 per share). This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere. We’d recommend looking at one of our all-time favorite software stocks.

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