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Starbucks Corporation (SBUX) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Starbucks Corporation (SBUX)

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Intrinsic Value (DCF)

Current$89.96
→
Intrinsic$36.61
-59%
$17.76$36.61$74.11
Market implies 33% growth for 5 years
Current price reflects execution expectations above 16% growth — not unreasonable for quality businesses.
At $90, the market prices in continued strong cash flow growth (33%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $18 → Bull $74. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →12%14%16%18%
8%$51$57$63$70
10%$28$32$37$41
12%$16$19$23$26
14%$9$11$14$16

Bull Case

  • Bull case ($74) with 19% growth, 8% discount rate

Bear Case

  • Bear case ($18) implies 80% downside at 12% growth, 12% discount
  • Price reflects 33% growth expectations vs 16% historical — high bar to clear
  • Trading 59% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$2.82B
Year 2$3.26B
Year 3$3.77B
Year 4$4.36B
Year 5$5.04B
Terminal$79.84B

📐 Model Inputs

Growth Rate15.6%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$2.44BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is SBUX stock undervalued or overvalued?
🔴 OVERVALUED

SBUX trades at $89.96 vs. our DCF-derived intrinsic value of $35.29, implying -61% downside. Using a 9.5% WACC and 15.6% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($62.28) suggests limited upside.

What is SBUX's intrinsic value?

Using a 5-year DCF model: Base FCF of $2.44B, projected at 15.6% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $23.39B net debt and dividing by 1.14B shares: Bear $16.88 | Base $35.29 | Bull $62.28. Current price $89.96 implies -61% to base case.

How is SBUX's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 15.6% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($63.62B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.