Starbucks Facing Full Valuation & Chart Pause (SBUX)

Starbucks Corporation (NASDAQ: SBUX) showed solid sales and earnings growth and boosted  its dividend last week.  Our initial take based upon the reaction to the guidance is that this turnaround has fully turned around and that the value of the stock fully reflected a complete turnaround.  That alone might not be a call for a top, but there are some concerns brewing here.

Our technical analysis affiliate, Adam Hewison of INO, has an audio-video chart analysis calling for performance problems in Starbucks’ shares.  It may be hard to endorse his lower-end target that is based solely on technicals because that was down almost at $15.00.  The first real target if the market does not strengthen handily was $20.00.

JPMorgan maintained an “overweight” rating but took the target to $29.00 from $30.00.  Piper Jaffray maintained an “Overweight” rating but lifted its target to $3.002 from $30.00.  Analysts just did not make any huge calls here after earnings, another signal that the turnaround has turned.  Thomson Reuters has an average price target of roughly $29.60.

Shares are currently around $25.05, which is less than 1% different than when its earnings were released.  So far this is just a tug-of-war between bulls and bears.

The stock is nestled between its 50-day moving average (%25.97 today) and the 200-day moving average ($23.78 today). Until the shares get closer to either price and perhaps until those averages converge, this one looks like it is in a technical no-man’s land.

Unless something new and unknown happens, this issue feels fully valued.  Shorting solely on valuations is often just as much guess-work as shorting based solely on a chart pattern.  Unfortunately for Starbucks holders, the same is true for buying.

JON C. OGG