Starbucks Valuation in Focus After Production Cuts and China Stake News: A Comprehensive Analysis

Starbucks shares have fluctuated in the past year, closing at $88.19, down 0.2% over the last week and 4.9% over the month. Despite this, the company is up 14% in the past three and five years. Valuation checks reveal the stock is undervalued in just one out of six key categories, giving it a valuation score of 1. A Discounted Cash Flow (DCF) analysis estimates an intrinsic fair value of approximately $71.26 per share, implying the stock is 23.8% overvalued based on present cash flow expectations.

Starbucks (SBUX) shares have experienced significant fluctuations in the past year, closing at $88.19 on July 2, 2025, down 0.2% over the last week and 4.9% over the month. Despite these recent declines, the company has shown resilience, with a 14% increase in share price over the past three years and a 15% rise over the past five years [1].

The recent earnings report for the third quarter of fiscal 2025 revealed mixed results. Starbucks reported earnings per share (EPS) of $0.50, which missed the Zacks Consensus Estimate of $0.65. However, net revenues of $9.46 billion exceeded expectations by $1.7 billion, marking a 3.8% year-over-year increase [1]. The company attributed the earnings shortfall to a one-time investment in Leadership Experience 2025 and a discrete tax charge, which together impacted EPS by 11 cents.

The company's operating margin contracted by 660 basis points (bps) to 10.1% year over year, primarily due to deleverage and investments associated with the "Back to Starbucks" initiative. Despite this, the company's global comparable store sales declined by only 2%, indicating resilience in its core business [1].

Institutional investors have shown significant interest in Starbucks, with Soros Capital Management LLC increasing its holdings by 292.6% in the first quarter. The company's dividend payout ratio is currently 105.17%, with a quarterly dividend of $0.61 per share [2].

Analyst ratings have been mixed, with some analysts upgrading their ratings. Stifel Nicolaus, for instance, raised its price objective on shares of Starbucks from $92.00 to $105.00 and gave the stock a "buy" rating [2]. However, the overall sentiment remains cautious, with a valuation score of 1 out of 6 key categories indicating that the stock is undervalued in just one category.

A Discounted Cash Flow (DCF) analysis estimates an intrinsic fair value of approximately $71.26 per share, implying that the stock is 23.8% overvalued based on present cash flow expectations [1].

References:
[1] https://www.nasdaq.com/articles/starbucks-sbux-down-55-last-earnings-report-can-it-rebound
[2] https://www.marketbeat.com/instant-alerts/filing-soros-capital-management-llc-buys-19430-shares-of-starbucks-corporation-sbux-2025-08-25/