Starbucks Corporation (SBUX): what the price assumes

In the published model solve dated 2026-Q2, anchored at $107.76, Starbucks Corporation (SBUX) is priced for today's economics sustained for ~6.6 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-26.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/SBUX

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.8% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that call it expensive: Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.8%); the inversion above states its own rate.

Per-Model Detail (n=4)

Solvency

Bullet Takeaways

• Starbucks has just moved 7,991 coffeehouses off its own books, selling 60% of its China retail operations to Boyu Capital on March 30, 2026 for total consideration of 3.1 billion dollars while keeping 40% and the brand licence, a change the company says will lower reported revenue and raise operating margin from the third fiscal quarter.
• There is no book equity under the shares: total liabilities of 39,015.2 million dollars stood against total assets of 30,557.5 million at March 29, 2026, leaving a shareholders' deficit of 8,465.1 million after years of buybacks funded with borrowing.
• Third-quarter results land July 29, 2026 and will carry both a material pre-tax gain on the China sale and the first period reported under the licensed model, on top of comparable store sales that ran 6.2% higher in the March quarter.

Bull Case

Restaurant chains are among the easiest businesses to misprice, because two companies selling identical food can have entirely different economics depending on who holds the lease. A franchisor or licensor collects a royalty on somebody else's sales and carries almost none of the cost of making them. A company-operated chain books the whole ticket and the whole payroll. MCD, which runs almost entirely on the first model, earns an operating margin near 46% on revenue of roughly 27 billion dollars. Starbucks, which has run mostly on the second, earned 8.6% on a trailing basis. That gap is not a verdict on coffee. It is a description of ownership.

Which is why the most consequential thing Starbucks did this year was not a menu change. On March 30, 2026 it closed the sale of 60% of its China retail operations to Boyu Capital, its joint venture partner, for total consideration of 3.1 billion dollars, retaining 40% and continuing to own and license the brand and intellectual property to the new entity. Seven thousand nine hundred and ninety-one company-operated coffeehouses transitioned to a licensed model in a single step, with a stated shared ambition to reach as many as 20,000 locations over time. The filing states the consequence plainly: the change "will result in lower revenues and higher operating margin for Starbucks beginning in the third quarter of fiscal 2026, as compared to the historical, company-operated model". Proceeds are earmarked for debt reduction.

The store business underneath was already recovering before that transaction closed, and recovering in the way that counts. Second quarter revenue reached 9,531.5 million dollars against 8,761.6 million a year earlier, with comparable store sales up 6.2%, of which 3.8 points came from more transactions and 2.3 from a higher average ticket. Across the first two quarters, comparable sales rose 5.0% on a 3.3% increase in transactions. Price increases are the easy half of a comparable-sales number and they run out. More people through the door is the half that has to be earned, and it is the larger half here.

A third leg has been growing quietly outside the stores entirely. Other revenues rose 36.1% in the quarter to 626.7 million dollars, driven mainly by a 149 million dollar increase in the Global Coffee Alliance, the packaged-coffee partnership that puts Starbucks product on grocery shelves without Starbucks paying for the shelf. That channel behaves like a consumer packaged goods business rather than a restaurant one, and the economics show it: KO runs a 29% operating margin and PG about 23%, against the low-teens and single-digit margins typical of operating restaurants. Every dollar that migrates from company-operated stores to licensing, royalties and packaged goods lifts the blend.

Management's record on setting expectations supports giving the plan room. Since 2006 the company has raised its outlook on eleven occasions against a single cut, reaffirming it on six more and initiating fresh guidance four times. The share count has been essentially unchanged over the four years to March 2026, so the recovery in per-share terms is the recovery in absolute terms rather than an artefact of shrinking the denominator. On July 1, 2026 the board declared a quarterly dividend of $0.62 a share, which the business has kept paying through the worst of the restructuring.

Bear Case

There is no equity underneath this share price, in the plainest accounting sense. At March 29, 2026 total liabilities of 39,015.2 million dollars sat against total assets of 30,557.5 million, leaving a shareholders' deficit of 8,465.1 million and a retained deficit of 8,881.0 million. That is the arithmetic residue of a long stretch of repurchasing stock with borrowed money. It is not by itself a crisis, and several durable businesses run this way. What it does mean is that anything a buyer owns here is the future cash the stores generate, with nothing behind it if that cash stops arriving.

The obligations on the other side of that are substantial and mostly fixed. Borrowings stood at 15.1 billion dollars, split between 13,084.2 million long-term and 1,997.7 million falling due within a year, alongside operating lease liabilities of roughly 9.3 billion and deferred revenue of 5,678.7 million. Cash and equivalents had fallen to 1,532.0 million from 3,219.8 million at the September year end. Operating profit covered the interest bill about 6 times over on a trailing basis, which is adequate rather than generous for a company whose trailing operating margin is 8.6%.

Leases are the specific thing that makes an operator fragile in a downturn, and they are the specific thing Starbucks has more of than its peers. When sales fall, a franchisor collects a smaller royalty and moves on; an operator still owes the rent on every store. The cost of getting out is visible in the restructuring already under way: the operating lease liability attached to stores in the plan was 243.2 million dollars at March 29, 2026, with roughly 150 million more of restructuring expense expected across the remainder of fiscal 2026, mostly lease exit costs and accelerated right-of-use amortisation in North America. That is the price of closing a modest number of stores in a stable economy. The arithmetic scales badly.

The reported margin improvement also deserves a harder look than the headline invites. Operating margin expanded 780 basis points to 19% in the second quarter, of which roughly 520 basis points came from reclassifying the China retail assets as held for sale and about 430 from sales leverage. Goodwill fell from 3,368.9 million dollars to 1,295.1 million across the same two quarters as China moved out of the consolidated accounts. Net earnings for the first half were 804.0 million against 1,165.1 million a year earlier. The recovery in customer traffic is genuine and measurable. A large part of the improvement in reported profitability is a change in what is being reported.

Set the price against that and the demand becomes clear. The market is paying roughly 33 times company-wide operating income, a multiple sitting at the very top of the restaurant peer distribution and well beyond its upper quartile, which inverted requires today's economics to hold at the self-funding ceiling for about six years. Only around 27% of comparable fast growers have sustained that pace for even 5.7 years. Meanwhile MCD earns an operating margin near 46%, YUM about 31% and QSR about 25%, all on franchised models, and CMG about 15% while running its own restaurants. Starbucks is being asked to pay the group's highest multiple out of one of its thinner margins, and the bridge between those two facts is a licensing transition that has been in effect for less than one reported quarter.

Valuation

The price is paying for the turnaround to run a long time. At $103.22 the market values the business near 33 times company-wide operating income, which inverted implies today's economics held at the self-funding ceiling for roughly six years. That comes from a single solve rather than a measurement, and it is sensitive to the discount rate: a single percentage point on the assumed cost of capital moves that horizon by about a third. The shape matters more than the decimals. The shape is demanding on two counts: the multiple sits at the very top of the restaurant peer distribution, well beyond the upper quartile, and only about 27% of comparable fast growers have sustained that kind of pace for even 5.7 years.

Only one lens produces a clean reading here, and it says the same thing. Peer multiples put the price roughly 1.85 times above where comparable restaurant valuations land. The reason the other lenses go quiet is on the balance sheet rather than in the business: with a shareholders' deficit of 8,465.1 million dollars at March 29, 2026, any approach that begins with what the company owns has no base to begin from. That is what a decade of returning more capital than you retain looks like on a balance sheet, and it pushes the entire weight of the valuation onto forward cash generation.

The peer set makes the comparison concrete. MCD earned an operating margin near 46% on revenue around 27 billion dollars, YUM about 31% on 8.5 billion, and QSR about 25% on 9.6 billion, each running a franchised system where the operator's costs sit on somebody else's books. Among those that run their own restaurants, CMG earned about 15% and DRI about 11%. Starbucks earned 8.6% on a trailing basis. On margin alone it belongs near the bottom of that list; on multiple it sits at the top.

What complicates the comparison, and what a buyer at today's price is really underwriting, is that the mix is changing underneath it. Moving 7,991 China coffeehouses to a licensed model shifts Starbucks toward the structure MCD and YUM use, and the company states the effect directly: the transition "will result in lower revenues and higher operating margin for Starbucks beginning in the third quarter of fiscal 2026". The trailing 8.6% margin is therefore describing a company that no longer quite exists. Where the new margin settles, and whether a multiple set at the top of the group is the right price for it, is the open question, and nothing in the trailing numbers answers it.

Solvency frames the downside without settling the question either. Borrowings of 15.1 billion dollars and operating lease obligations near 9.3 billion sit against cash of 1,532.0 million at the March quarter end, with trailing operating profit covering interest about 6 times over. The 3.1 billion dollars of consideration from the China sale is earmarked for debt reduction, which would improve both of those figures in the quarter now being reported. The share count has been flat across the four years to March 2026, so what the business earns is what shareholders get a claim on, neither diluted nor concentrated by capital actions.

Catalysts

Third-quarter results arrive on July 29, 2026, and they will be unusually hard to read. The quarter is the first to exclude the China retail operations, which were deconsolidated on March 30, 2026 and now sit inside the licensed portfolio, and the company has said it expects to recognise a material pre-tax gain on the disposal without yet quantifying it. Revenue will fall against the prior year for reasons that have nothing to do with demand, and the operating margin will rise for the same reason. The number to watch is comparable store sales, which ran 6.2% higher in the March quarter on a 3.8% increase in transactions.

The China transaction itself closed at the start of the fiscal third quarter. Funds managed by Boyu Capital acquired 60% of Starbucks China retail for total consideration of 3.1 billion dollars, with Starbucks retaining 40% and continuing to own and license the brand and intellectual property to the joint venture, which oversees 7,991 coffeehouses and carries a shared ambition to grow toward 20,000 locations. Management has said the proceeds are intended for debt reduction and balance sheet repair rather than for buybacks, which given the shareholders' deficit is the more useful of the two options.

Two smaller items run on known timetables. The fiscal 2025 restructuring plan is expected to reach substantial completion within fiscal 2026, with roughly 150 million dollars of further expense anticipated over the remainder of the year, primarily lease exit costs and accelerated right-of-use asset amortisation in the North America segment. And the board declared a quarterly cash dividend of $0.62 a share on July 1, 2026, maintaining a payout that has continued uninterrupted through the restructuring and the China sale.

Peer Cohorts (Per Segment, With Filing Citations)

Channel Development (reported)

• PG (PROCTER & GAMBLE CO)
• FY2025 10-K: …basis relative to all product sales in the category. The Company measures market shares through the most recent period for which market share data is available, which typically reflects a lag time of one or two months as compared to the end of the reporting period. Management also uses unit volume growth to evaluate…
• FY2025 10-K: …around the world and against our best competitors requires superior innovation. Innovation has always been, and continues to be, P&G's lifeblood. Superior products delivered with superior execution drive market growth, value creation for retailers and build share growth for P&G. Ongoing productivity improvement is…
• KO (COCA COLA CO)
• FY2025 10-K: …invest in our talent for growth in our networked organization. We believe in providing challenging and diverse experiences and opportunities to our people to help them develop and grow. Our global career strategy program, called Thrive, is designed to provide clarity to employees on what it means to have a career at…
• FY2025 10-K: …growing at a rapid pace, while in emerging and developing markets, modern trade is growing at a faster pace than traditional trade outlets. Our industry is also being affected by the rapid growth in sales through e-commerce retailers, e-commerce websites, mobile commerce applications and subscription services, which…
• PEP (PepsiCo, Inc.)
• FY2025 10-K: …allows us to compete effectively. Research and Development We engage in a variety of research and development activities and invest in innovation globally with the goal of meeting the needs of our customers and consumers and accelerating growth. These activities principally involve: innovations focused on creating…
• FY2025 10-K: …we are using artificial intelligence to reimagine our go-to-market model, enhance customer support, and empower sales teams to focus on strategic growth. This allows us to unify data, gain real-time inventory visibility, and provide faster, more responsive customer service. We are becoming more resilient through…
• CL (COLGATE-PALMOLIVE COMPANY)
• FY2025 10-K: …business, results of operations, cash flows and financial condition could be adversely affected. 8 The growth of our business depends on the successful identification, development and launch of innovative new products. Our growth depends on the continued success of existing products, the successful identification,…
• FY2025 10-K: …developments, including developments in trade relations and the negotiation of trade agreements, tax and immigration policies, significant competition and a highly competitive omni-channel marketplace, including as a result of the growth of eCommerce and the emergence of AI, a rapidly changing retail landscape and…

Core business (reported)

• MCD (McDONALD’S CORPORATION)
• FY2025 10-K: …Operated Markets. Operating margin is defined as operating income as a percent of total revenues. The contributions to operating margin differ by segment due to each segment's ownership structure, primarily due to the relative percentage of franchised versus Company-owned and operated restaurants. Additionally,…
• FY2025 10-K: …charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel. McDonald's Corporation 2025 Annual Report 17 OPERATING INCOME Operating income Amount Increase/(decrease) Increase/(decrease) excluding currency translation…
• CMG (CHIPOTLE MEXICAN GRILL, INC.)
• FY2025 10-K: …we believe will drive our financial results and long-term growth model. W e believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies: • Comparable restaurant sales • Food, beverage, and…
• FY2025 10-K: …operating segment is comprised of all 11 operating segments located in the United States, which we have aggregated to a single operating segment in consideration of the aggregation criteria set forth in ASC 280. All other operating segments, which comprise our operations in Canada, Europe and international…
• YUM (YUM! BRANDS, INC.)
• FY2025 10-K: …stores, coffee shops, snack bars, delicatessens and restaurants (including those in the QSR segment), and is intensely competitive with respect to price and quality of food products, new product development, digital engagement, advertising levels and promotional initiatives, customer service reputation, restaurant…
• FY2025 10-K: . We intend to drive long-term growth and shareholder returns primarily through consistent same-store sales growth and new unit development across all of our Concepts. We intend to support this growth and development through a capital and operating structure that: 30 • Invests capital in a manner consistent with an…
• QSR (RESTAURANT BRANDS INTERNATIONAL INC.)
• FY2025 10-K: , interruptions in the availability and delivery of food, beverages, and other supplies to our restaurants or retailers arising from shortages or greater than expected demand may increase costs or reduce revenues. As of December 31, 2025, we have only one or a few suppliers to service each category of products sold at…
• FY2025 10-K: …meets our definition of a restaurant that will be included in our net restaurant growth, we consider factors such as scope of operations, format and image, separate franchise agreement, and minimum sales thresholds. We refer to restaurants that do not meet our definition as "alternative formats" and we believe these…
• YUMC (Yum China Holdings, Inc.)
• FY2025 10-K: …to our business. Our policy is to pursue registration of our important intellectual property rights whenever feasible and to oppose vigorously any infringement of our rights. 16 2025 Form 10-K Competition Data from the National Bureau of Statistics of China indicates that sales in the restaurant industry in China…
• FY2025 10-K: …which we operate is highly competitive. The restaurant industry in which we operate is highly competitive with respect to price and quality of food products, new product development, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance…
• DRI (DARDEN RESTAURANTS, INC.)
• FY2025 10-K: …share). SEGMENT RESULTS We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Chuy's, Yard House, Ruth's Chris, The Capital Grille, Seasons 52, Eddie V's, Bahama Breeze and The Capital Burger in the U.S. and Canada as operating segments. We aggregate our operating segments…
• FY2025 10-K: …(CODM). Our CODM uses segment profit as the measure for assessing performance of our segments. Segment profit includes revenues and expenses directly attributable to restaurant-level results of operations (sometimes referred to as restaurant-level earnings). Non-cash lease-related expenses from our operating segments…
• ARCO (Arcos Dorados Holdings Inc.)
• FY2025 20-F: …day-to-day operation of the entity's restaurants. Restaurants operated by entities in which the Company has a majority stake are considered to be Company-operated; whereas, restaurants operated by entities in which the Company holds a minority stake are considered to be franchised restaurants. Market Share and Other…
• FY2025 20-F: …adverse effect on our business, financial condition, results of operations and cash flows. 24 Table of Contents Risks Related to Our Industry The food services industry is intensely competitive and we may not be able to continue to compete successfully. Although competitive conditions in the QSR industry vary in each…
• ARMK (Aramark)
• FY2025 10-K: …our results of operations. There is significant competition in the food and support services business from local, regional, national and international companies, of varying sizes, many of which have substantial financial resources. Our ability to successfully compete depends on our ability to provide quality services…
• FY2025 10-K: …except in those cases where the contract and/or applicable law requires us to credit these to our clients. For our client interest contracts, both our upside potential and downside risk are reduced compared to our profit and loss contracts. For fiscal 2025, approximately one-third of our revenue was derived from…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.