Starbucks has a very mixed stock chart. Shares are above the 50-day moving average of $75.61 and even further above the 200-day moving average of $74.28. That being said, it dipped under the 200-day average during the peak selling in October — to a low of roughly $70. It had also been a chief rebounding stock leader, rising up to $77 during the recovery. The stock peaked at about $80 in the summer, and $78 acted as a key resistance level for most of August and in early September.
Options traders appear to be braced for a move of about $1.50 in either direction. That is not much of a move for such a dominant company with millions of customers who are engaged daily or weekly.
As far as valuations, Starbucks trades at close to 28 times its current trailing earnings and 24-times next year’s expected earnings. Keep in mind that the company has now been public for more than 20 years — and it now has a market cap of $57 billion.
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What is interesting is that there have been very few major analyst changes in Starbucks of late. Zacks reiterated a Neutral rating for Starbucks with a price target of $81 on September 10. Citigroup reiterated a Buy rating and raised its price target to $91 from $84 on August 4.
24/7 Wall St. recently noted that some 150,000+ consumers were urging Starbucks’ CEO to switch to organic milk with a major social media push. The release also said that tens of thousands more are expected to participate on Facebook, Twitter and Instagram. We have yet to see any realistic figure on what this would do to Starbucks pricing. Starbucks has had price hikes in the past. Over a decade ago, a larger price hike on all its coffee prices was specifically cited as being due to higher milk prices. To the consumers who do not use milk in their coffee, this increase would feel a little bit like a subsidy.
Starbucks announced this month, prior to earnings, that it will roll out the first phase of a multiyear investment initially by giving all baristas and shift supervisors a pay increase. It will later go on to offer increased wages correlating with employee tenure, and employees will be given an annual pay review when they are eligible for an increase. Apart from the imminent wage increase, employees will offer promotional opportunities for providing support within their stores.
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Shares of Starbucks were trading up less than 1% at $76.61 in the first hour of trading Thursday. They have a consensus analyst price target of $90.55 and a 52-week trading range of $67.93 to $82.50.
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