NEW BULLISH Plays
Starbucks Corp. - SBUX - close: 62.16 change: +0.27
Stop Loss: 58.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 08, 2015
Time Frame: Exit prior to earnings in January
Average Daily Volume = 8.8 million
New Positions: Yes, see below
Do you know someone giving or getting a Starbucks gift card for the holidays this year? Odds are you do (see below). The recent action in SBUX looks like another bullish entry point.
We have traded SBUX more than once this year.
Here is an updated play description and entry point on the stock:
The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.
A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.
The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.
In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:
"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."
"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."
The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years
They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.
Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.
The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.
SBUX is a big company and yet they continue to deliver strong earnings and revenue growth. Their Q2 2015 results, released in April, saw revenues up +17.8%. Q3 results, announced in July, saw revenues up +17.5%. Their Q4 results were announced on October 29th. Revenues grew +17.5% again. The company has been killing it with strong same-store sales. Q1's global same-store sales were +7%. Q2's same-store sales were also +7%. Q3's rose to +8%. What's impressive is SBUX is able to deliver this sort of sales growth in spite of the strong dollar and its negative foreign currency impact.
SBUX management provided guidance for Q1 2016 with earnings just below analysts' estimates. They still see double-digit revenue growth next year. The company plans to open about 1,800 new locations in fiscal 2016.
SBUX continues to build out their technology improvements. They see millions of orders a week on their mobile transactions platform. Currently they are testing a delivery service in Seattle.
It's also worth mentioning that the holiday season is normally a strong one for SBUX. Last year one in seven Americans received a Starbucks gift card.
We should also note that there is currently an E. Coli scare going around. Chipotle (CMG) is getting hammered on this story. Other companies like Costco and Starbucks have also had issues with E. Coli in a few products recently but thus far the impact has been very limited for SBUX.
Technically SBUX is in an up trend. It is also one of the best performing stocks in the S&P 500 this year with SBUX up +50% year to date. The point & figure chart is forecasting at $68.00 target. The stock peaked in late October and has spent the last few weeks consolidating sideways. The dips below $60 found support near prior resistance and now SBUX has built a potential bullish double bottom pattern. Tonight we are suggesting a trigger to launch bullish positions at $62.65.
Trigger @ $62.65
- Suggested Positions -
Buy SBUX stock @ $62.65
- (or for more adventurous traders, try this option) -
Buy the FEB $65 CALL (SBUX160219C65) current ask $1.49
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike