Starbucks Corporation (SBUX): A Bull Case Theory 

We came across a bullish thesis on Starbucks Corporation on Darius Dark Investing’s Substack. In this article, we will summarize the bulls’ thesis on SBUX. Starbucks Corporation’s share was trading at $85.29 as of September 22nd. SBUX’s trailing and forward P/E were 36.92 and 31.15 respectively according to Yahoo Finance.

Starbucks (SBUX), once a cultural icon and a near-perfect compounding machine for investors, is confronting its most profound crisis since 2008. Over the past five years, the stock has underperformed, reflecting deteriorating fundamentals. Fiscal 2025 results highlight a deep operational malaise: Q3 non-GAAP EPS fell 46% YoY, U.S. comparable transactions dropped 8%, and GAAP operating margins contracted by 680 basis points to 9.9%.

Revenue growth has stalled, and the company faces rising labor costs and declining pricing power, signaling that its premium brand positioning can no longer offset falling traffic. Internationally, the China business has collapsed, with market share dropping from 34% in 2019 to 14% in 2024, as digitally-native competitor Luckin Coffee undercuts Starbucks’ high-cost “third place” model with low-overhead, convenience-focused offerings. Plans to sell a stake in the China unit underscore the strategic retreat and highlight structural vulnerabilities in Starbucks’ global model.

The appointment of Brian Niccol as CEO in September 2024 provides a potential catalyst. Niccol, a proven turnaround specialist, has introduced the “Back to Starbucks” strategy, combining a revival of in-store experience with operational efficiency improvements, menu innovation, digital rewards enhancements, and a $3 billion efficiency programme. The strategy aims to serve both experience-driven and convenience-focused customers, but its success hinges on execution and a stable workforce. Unionisation and contentious labor relations, with over 600 stores unionized and ongoing legal disputes, create significant operational and financial headwinds, threatening margins and implementation.

Investors face a high-risk, high-reward scenario. While Niccol’s leadership offers hope, the stock trades at a P/E of 36, implying near-perfect execution amid severe structural challenges. Key indicators to watch include labor negotiations, U.S. transaction trends, and margin stabilisation. Without progress on these fronts, the turnaround could falter, leaving the current valuation unjustified. Starbucks today is a company at a crossroads, where faith in leadership must contend with deep, systemic hurdles.

Previously we covered a bullish thesis on Starbucks Corporation (SBUX) by Business Model Mastery in May 2025, which highlighted the company’s ability to monetize habits, scale its loyalty ecosystem, and generate high-margin revenue globally. The stock has appreciated approximately 4.4% since our coverage as these strengths remained intact. Darius Dark Investing shares a similar view but emphasizes near-term operational pressures, China challenges, and CEO Niccol’s turnaround strategy.

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Disclosure: None.