Starbucks stock price’s bullish trend was interrupted this past week as the shares declined by more than 10%. The coronavirus epidemic in China has affected the company more than many others. Starbucks has was forced to close more than half of its stores in China temporarily (There have been unconfirmed reports that it is closing all). The company owns 4292 stores (12.75%) in the country, so the suspension of more than half of them will lead to considerable losses in profits.
With reports of the coronavirus in full force within China and the borders are shut down. This might be the perfect time to short Starbucks. No announcements have been made about the duration of the shutdown, but this will have a significant effect on Starbucks Q1 2020 financials.
(USD) Dec 2019 Y/Y
Revenue 7.1B 7%
Net income 885.7M 1 6.45%
Diluted EPS 0.74 21.31%
Net profit margin 12.48% 8.81%
On January 28, Starbucks reported income for Q4 2019 and a full-year fiscal 2019(See Above). The annual net gains amounted to 885.7M, exceeding 760.6M for the previous year. Revenue in Q4 2019 coincided with the forecast and amounted to 7.10B. Earnings per share were higher at USD 0.79, compared with USD 0.7 a quarter earlier. Taking into account the ongoing spread of coronavirus in China, it can be assumed that the negative trend with the closure of stores will continue, and the company’s shares will decline further.
AlphaBetaStock.com’s research team is closely monitoring the Cornonavirus for updates. It has been extremely challenging to get confirmation of the actual number of cases and deaths because China has been very secretive of the virus. China’s central bank is reportedly pumping in 150 billion yuan ($21.7 billion) in the markets and is also banning short sales.
Investors are focused on the deadly virus epidemic in China, which is beginning to cause real economic damage. In particular, Walmart, Tesla, Google, Apple, and several others have joined Walt Disney, Starbucks, and McDonald’s, which have already limited their work in China. Chinese authorities extended the New Year holidays until February 9, which may create pressure on the trade and production sectors of the world economy. Today, USD is technically recovering after a significant Friday’s weakening.
Also, as directed by President Donald Trump, US citizens who have traveled to China over the past two weeks have been temporarily banned from entering the United States. In response, the Chinese authorities accused Washington of spreading panic, as this decision contradicts WHO recommendations.
During the day, investors are waiting for the publication of January data US ISM Manufacturing PMI. The indicator is expected to grow from 45.1 to 46.6 points, which may affect USD negatively.
Published today, January Manufacturing PMI for Germany and the EU were positive but could not help EUR amid general market concern about possible economic losses as a result of the epidemic in China. The index for Germany rose from 43.7 to 45.3 points, which is the best indicator since last February. The EU index rose from 46.3 to 47.9 points, which was the highest since last April. However, both indices stayed in the stagnation zone. EUR is weakening against JPY and USD but is strengthening against GBP.
The January Manufacturing PMI released today was strong. The index rose from 47.5 to 50.0 points, the best indicator since last May, and reached the border of the growth zone. Nevertheless, this data could not help GBP. Investors are frightened by the uncertainty created after Britain left the EU. The transitional period that has begun should be used by the parties to conclude a trade agreement, but this may not happen due to the tough positions of the parties. The UK is pushing for a deal with zero tariffs and quotas, while the EU is against it. Yesterday, British Prime Minister Boris Johnson said he would instead agree to accept higher trade tariffs than the jurisdiction of the European Court, which once again confirmed the difficulty of the upcoming trade negotiations.
Starbucks’s Support and Resistance
Starbucks stock is trading slightly up in Pre-Market, but we believe there is strong BEARISH Trend. It will likely bounce up as temporary correction from the recent decline. The trend is not likely to change in the near future and one should join the sellers, as the nearest support is around 80.00. The AO oscillator crossed the zero level and confirmed the sell signal previously issued by the Alligator indicator. Resistance levels: 87.00, 93.00. Support levels: 80.00.
Starbuck Stock Trading Ideas – Short?
If Startbucks’ stock continues declining, one should continue increasing SHORT positions. New trades can be opened at current quotes with the target at 80.00 and stop loss at 87.00. In case of price reversal and asset growth, as well as price consolidating above the resistance level of 87.00, purchase positions with target of 93.00 will be relevant. Stop loss should be placed below the recent low, at 85.00. Implementation time: 7 days and more.
Starbucks Stock Recommendations
Jan-29-20 Reiterated Canaccord Genuity Hold $40 → $38
Jan-17-20 Downgrade Wells Fargo Equal Weight → Underweight $45 → $32
Jan-09-20 Downgrade Jefferies Hold → Underperform $31
Oct-24-19 Reiterated BofA/Merrill Neutral $45 → $42
Oct-24-19 Downgrade Raymond James Outperform → Mkt Perform
Oct-24-19 Downgrade Aegis Capital Buy → Hold
Oct-21-19 Resumed Deutsche Bank Hold $46 → $42
Sep-27-19 Downgrade Wells Fargo Outperform → Market Perform
Sep-04-19 Downgrade UBS Buy → Neutral $42
Jul-18-19 Reiterated Aegis Capital Buy $43 → $45
Apr-24-19 Reiterated The Benchmark Company Buy $42 → $45
Jan-30-19 Reiterated The Benchmark Company Buy $41 → $42
Jan-30-19 Reiterated Susquehanna Positive $33 → $43
Jan-30-19 Reiterated Raymond James Outperform $35 → $39
Jan-30-19 Reiterated Citigroup Buy $42 → $41
Jan-23-19 Reiterated BofA/Merrill Neutral $34 → $38
Jan-04-19 Downgrade Goldman Buy → Neutral
Jan-02-19 Reiterated Aegis Capital Buy $44 → $40
Dec-12-18 Downgrade Morgan Stanley Overweight → Equal-Weight
Oct-31-18 Reiterated UBS Buy $44 → $42
Starbucks Stock 1 Day Moving Averages – Strong Sell
Name Value Action
Exponential Moving Average (5) 86.98 Sell
Simple Moving Average (5) 86.94 Sell
Exponential Moving Average (10) 88.52 Sell
Simple Moving Average (10) 89.92 Sell
Exponential Moving Average (20) 89.16 Sell
Simple Moving Average (20) 89.99 Sell
Exponential Moving Average (30) 88.96 Sell
Simple Moving Average (30) 89.41 Sell
Exponential Moving Average (50) 88.41 Sell
Simple Moving Average (50) 87.85 Sell
Exponential Moving Average (100) 87.57 Sell
Simple Moving Average (100) 87.01 Sell
Exponential Moving Average (200) 84.48 Buy
Simple Moving Average (200) 86.59 Sell
Ichimoku Cloud Base Line (9, 26, 52, 26) 89.33 Neutral
Volume Weighted Moving Average (20) 89.40 Sell
Hull Moving Average (9) 84.52 Buy
Evidence-based financial writer with 9 years of experience specializing in earnings, economic data coverage, and bond markets. I combine fundamentals, technicals, and macro to identify low-risk, asymmetric opportunities.