Starbucks (SBUX) Earnings On Deck
Starbucks (SBUX) will be announcing their numbers after the closing bell with analysts expecting a profit of 60 cents a share on revenue of $6.27 billion. The high estimates are at 63 cents and $6.56 billion with the low numbers at 57 cents and $6.06 billion. This could mean up to a 3-cent earnings beat or miss.
The company has topped and matched estimates twice apiece over the past four quarters by a penny last quarter and by 8 cents in Q42017.
There are 33 analysts that cover Starbucks with 10 Strong Buys; 14 Buys; and 9 Holds. Two analysts lowered their Price Target after the last earnings announcement. One from $69 to $61 and the other from $64-$58.
Bullish traders looking for an earnings beat and a possible surge past $60 can target the SBUX November 60 calls (SBUX181116C00060000, $1.20, up $0.15). The breakeven point would be $61.20 if shares are at this level, technically, on the close of November 16th. A double would occur if shares are above $62.40. If shares close below $60 the options will expire worthless.
Bearish traders expecting an earning or revenue miss and a pullback towards $57.50-$55 can target the SBUX November 57.50 puts (SBUX181116P00057500, $1.10, down $0.20). The breakeven point would be $56.40 if shares are at this level, technically, on the close of November 16th. A double would occur if shares are below $55.30. If shares close above $57.50 the options will expire worthless.
Shares have been testing near-term resistance at $59 since mid-October but haven’t closed above this level in 10 sessions. With the 52-week high just south of $62, shares could easily clear this level on an earnings beat and a rosy outlook.
Near-term support is at $58-$57.50 with a close below the latter being a slightly bearish development. However, with earnings due out, the $55 level could come into play on an earnings miss or lowered guidance. This area represents early June support and a level that was breached later in the month.
Shares fell from $57.43 to a low of $51.58 after the company gave a Q3 update at an Annual Consumer Growth conference in mid-June. Six sessions later they tapped a low of $47.37 for an 18% overall pullback following the news.
RSI (Relative Strength) peaked near resistance at 65 twice in October and is still in a downtrend. This can be considered a double-top with a move below support at 55 likely signaling additional weakness.
Wall Street Chatter
In its last growth update, Starbucks announced a set of strategic priorities and operational initiatives to accelerate growth and create long-term shareholder value following a performance that CEO Kevin Johnson called “not acceptable.”
More importantly, the company cut its Q3 global comparable store sales growth view and lowered its 2018 adjusted EPS outlook.
In June, former Chairman Howard Schultz said in an email that shares of Starbucks are “cheap and undervalued”. The current CEO has been a cheerleader as well the stock is undervalued and said the company is not considering entering the Canadian cannabis business.
CFO Scott Maw recently retired and his relatively young age and short tenure suggest the decision to leave was, perhaps, not entirely voluntary. There was chatter he was at least partly to blame for the damage to the company’s credibility that resulted from the inability to provide accurate guidance.