Starbucks CorporationSBUXNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $86.03 per share(market-calibrated)

-11.1%

Upside to Fair Value

Current

$96.76

Pure Model

$84.51

Fair Value

$86.03

Bull Case

$108.58

Bear Case

$64.09

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

4.29%

Calibrated Growth

3.19%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $84.51.

What's Driving This Ratingfor SBUX

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.77% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$945M in annual FCF. This is the biggest driver of long-term cash flow improvement.

→

Moderate revenue growth

Analyst consensus projects 3.05% revenue growth, fading to 3.00% by Year 10. Revenue reaches $53.4B (vs $37.2B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $69.09/share (24.0x terminal FCF) while exit multiple gives $99.93/share (36.0x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $96.76, the market implies 4.29% perpetual growth — 129bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 55.54% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.94

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.72%

Cost of Debt

Pre-tax Cost of Debt1.96%

Tax Rate30.00%

After-tax Cost of Debt1.37%

Equity Weight (E/V)80.56%

Debt Weight (D/V)19.44%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (80.56% × 8.72%) + (19.44% × 1.37%)

= 7.29%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$38.3B	$42.4B	$46.1B	$48.9B	$53.4B
EBIT	$5.9B	$6.5B	$7.0B	$7.5B	$8.2B
Tax	$1.8B	$1.9B	$2.1B	$2.2B	$2.4B
NOPAT	$4.1B	$4.5B	$4.9B	$5.2B	$5.7B
+ Depreciation	$1.8B	$2.0B	$2.2B	$2.3B	$2.5B
- Capex	$2.2B	$2.3B	$2.3B	$2.2B	$2.1B
- Δ NWC	$113M	$202M	$134M	$142M	$156M
Free Cash Flow	$3.6B	$4.0B	$4.7B	$5.1B	$5.9B
Discount Factor	0.932	0.810	0.703	0.611	0.495
Present Value	$3.3B	$3.3B	$3.3B	$3.1B	$2.9B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$5.9B

Terminal Growth Rate3.00%

WACC7.29%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$142.3B

PV of Terminal Value$70.4B

Exit Multiple Method

Year 10 EBITDA$10.7B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$213.3B

PV of Terminal Value$105.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$31.7B

PV of Terminal Value$70.4B

Enterprise Value$102.1B

(-) Net Debt$23.4B

Equity Value$78.8B

Shares Outstanding1.1B

Price per Share$69.09

Exit Multiple Method

PV of Projected FCFs$31.7B

PV of Terminal Value$105.6B

Enterprise Value$137.3B

(-) Net Debt$23.4B

Equity Value$113.9B

Shares Outstanding1.1B

Price per Share$99.93

Pure Model Fair Value

$84.51

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
5.29%	$114.38	$123.28	$136.09	$143.52	$136.93
6.29%	$93.21	$97.83	$103.86	$112.04	$123.80
7.29%	$78.43	$81.15	$84.51	$88.76	$94.29
8.29%	$67.19	$68.93	$71.00	$73.51	$76.60
9.29%	$58.18	$59.36	$60.73	$62.33	$64.24

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$64.09

-33.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.17

Base Case

$84.51

-12.7% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.94

Bull Case

$108.58

12.2% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.80

Key Assumptions & Drivers• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth3.05%

Year 3 Revenue Growth5.01%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin15.29%

Tax Rate30.00%

Historical Capex / Rev5.77%

Terminal Capex / Rev4.00%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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