Coffee giant Starbucks (SBUX 0.90%) could use some Wall Street caffeine these days.

As of this writing on March 18, the stock is down 15% since the end of February. The broader market is also swooning with a 5.6% S&P 500 (^GSPC 1.08%) decline in the same period, but Starbucks is taking a deeper dive.

Is the company in deep trouble, or is it high time to buy Starbucks stock?

Brian Niccol's Starbucks revival strategy

The company is operating under new management. Former Chipotle Mexican Grill (CMG 2.38%) CEO Brian Niccol is running the show now, brought in for his proven turnaround expertise. The coffee chain had been in dire straits for years before Niccol's arrival, bringing in company legend Howard Schultz for a third CEO stint in 2022.

Investors were quick to embrace Niccol, and for good reason. At Yum! Brands' (YUM 0.16%) Taco Bell division, he sparked a turnaround as chief marketing officer and then CEO. The secret sauce was Niccol's focus on customer-friendly company culture paired with a masterful balance between simple and satisfying menu options. Then he applied the same approach to a struggling Chipotle, doubling the chain's sales in six years while also widening its profit margins.

At Starbucks, he wants to bring the company back to its roots. The menu has been simplified, baristas are encouraged to hand-write customer names on the cups for that personal touch, and the company doesn't charge extra for milk alternatives anymore.

And the effort is off to a good start. In Niccol's first quarter on the job, Starbucks' top line snapped back from a 3.3% year-over-year decline to a 0.3% drop. The plunging trend lines for earnings and free cash flows also stabilized, indicating a slightly more efficient business model from the get-go.

So Brian Niccol seems to be proving his worth already. As a result of his hiring and early signs of success, the stock rose to a multi-year high of nearly $116 per share in February.

Why share prices are falling in March

As I mentioned earlier, Starbucks' stock has retreated more than 15% from the late-February peak. Investors are concerned about tariffs driving coffee prices higher, alongside a drought in the leading coffee-producer market of Brazil.

At the same time, Starbucks' formerly beaten-down stock rose to generous valuations since Niccol arrived last September. Shares are changing hands at 31.7 times trailing earnings and 38.3 times free cash flows today. That's affordable next to the valuation ratios of market darling Dutch Bros (BROS 5.06%), but fairly expensive in any other context.

Underappreciated challenges to Niccol's turnaround plan

Under these circumstances, buying Starbucks stock is a pretty clear bet on Brian Niccol scoring a hat-trick with a third consecutive turnaround of household-name restaurant chains.

I'm not sure the cards are stacked in Niccol's favor, though. Yes, the company's financials are moving in the right direction and the new CEO has a firm operating plan in mind. But he's facing a more robust field of coffee-shop rivals than ever, led by Dutch Bros' nationwide expansion effort. Coffee prices are up, and Niccol must turn that threat into a business advantage with the help of Starbucks' global production and distribution assets.

And Niccol isn't necessarily a hit among the barista ranks. A recent Restaurant Dive article suggests that many Starbucks stores run with "skeleton crews" even during busy hours, and the median salary is below the individual poverty standard of $15,650 per year. He often butted heads with Chipotle's worker unions, too. That's not a promising starting point for a healthy long-term CEO-to-workers relationship.

Crunching the numbers over coffee. Image source: Getty Images.

Starbucks in March: Too many challenges at too high a price

So Niccol has to balance an expensive operating environment with fragile employee relations, while also injecting new life in a stagnant brand with more rivals than ever. Can he do it? Perhaps. But it's by no means a slam-dunk win, the stock is too expensive for this challenging situation.

I'd rather watch the Starbucks turnaround drama from the sidelines. I'll reconsider this view if and when the stock price becomes more reasonable, either by continuing the March decline or by giving the business results a substantial boost. Hand me a quad hazelnut cappuccino if the price-to-earnings ratio ever dips to the mid-20s, and I'll take a second look.