Home Site Map About Us My Account Shopping Cart Help Sign In

Behind the Headlines: Starbucks Downgraded; Hits New Low

Starbucks spirals into the red after Bear Stearns downgrade

by Beth Gaston Moon (bgmoon@sir-inc.com) 1/2/2008 12:13 PM

Text Size |

Email a friend |

Print |

Keywords:

Appearing in part 2 of today's "Behind the Headlines" is Starbucks (SBUX), which has hit a new 52-week low today following a brokerage downgrade. "Behind the Headlines" is a daily feature available on SchaeffersResearch.com. Every day, we'll focus on the day's action of newsworthy stocks that are generating a lot of attention. By digging into the stock's sentiment and technical backdrop, we hope to shed some light on the securities.

So, 2007 wasn't a very good year for Starbucks (SBUX: sentiment, chart, options) � the coffee king of Seattle peeled away more than 42% - and 2008 hasn't kicked off any better. This morning, Bear Stearns downgraded its rating on the stock to "peer perform" from "outperform," citing a cooling economy that could stifle discretionary spending. The brokerage also has concerns over increased labor and dairy costs.

In a note to clients, Bear Stearns said that while "The company is actively trying to improve trends with [TV commercials] and new product focus...we think that Starbucks new cyclical sensitivity has more to do with its expanded customer base including less affluent consumers who react to economic pressures."

This downgrade could jump-start a trend toward the bearish end of the spectrum, as analysts have continued to grasp the bullish flag despite the stock's decline. Ahead of today's move from Bear Stearns, there were 5 "strong buy" and 8 "buy" ratings on SBUX, along with just 7 "holds" and 1 "strong sell." The equity is vulnerable to further downgrades, with 13 analysts still stubbornly residing in the bulls' camp. In the past 2 months � not counting today's downgrade � the number of "buy" ratings has dropped to 8 from 11, while the number of "holds" has shifted to 7 from 3.

The shares have reacted to today's downgrade by losing nearly 4%, breaching the 20 level, and entering new-annual-low territory. The stock is trading below its 80-month moving average (and the 10-month and 20-month trendlines are a distant memory), but it has yet to breach its 160-month trendline. This final bastion of technical support resides at the 17.20 level.

Monthly chart of Starbucks since January 1998 with 10-month, 20-month, 80-month, and 160-month moving averages

Options players continue to grasp to see Starbucks hit rock bottom. Schaeffer's put/call open interest ratio (SOIR) for SBUX currently stands at an annual low of 0.32. In other words, there are 100 open call positions in the January and February series (combined) for every 32 open puts. Call open interest is at its heaviest overhead, most notably at the January 25 and 30 strikes. This backdrop provides a layer of options-related resistance, but a move up as far as the 25 strike would represent a jump of nearly 30% in the shares. The near-the-money 20 strike is home to just 9,000 open January calls.

All of the excitement on Starbucks today has spurred some action in the January 2009 LEAPS calls. More than 3,000 contracts have changed hands on the January 2009 15 and 17.50 puts along with the January 2009 25 call. Prior to today, these options were home to open-interest levels of 4,644; 2,358; and 20,188, respectively.

For additional timely commentary on today's market-moving news from me and my colleagues Andrea, Elizabeth, Jocelynn, Joseph, and Mark, please visit our Schaeffer's Daily Market Blog section throughout the trading day.

Behind the Headlines: LDK Solar Rallies Headlong Into Resistance

Discuss this article:

Post your own comment

Options Stew: A Taste of the Week's Spiciest Plays

(11/20/2009 10:45:27 AM)

Welcome to our new video series, Options Stew, where we take a look back at what's been cookin' in the option pits this week. Join us as we sample just a few of the unusual option plays from the past week, with our "recipe" broken down into three unique segments:

read more...

Schaeffer's Media Outtake: Thoughts on Hedging, Volatility

(11/19/2009 4:15:00 PM)

"Standard & Poor's, the world's leading index provider, announced today the launch of the S&P 500 Dynamic VEQTOR Index which dynamically allocates between equity, volatility and cash to provide broad equity market exposure with an implied volatility hedge. 'Implied equity volatility typically has a strong negative correlation to equity market returns, and is considered a useful tool to hedge against the potential downside risk of the broad equity market,' says Liz Taxin, Director of Strategy Indices for S&P Indices. The S&P 500 Dynamic VEQTOR Index is comprised of three components: Equity, as represented by the S&P 500; Volatility, as represented by the S&P 500 Short-Term VIX Futures Index; and Cash, as represented by the Overnight LIBOR rate. The Index allocates between equity and volatility based on the combination of realized and implied volatility trend decision variables, and these allocations are evaluated on a daily basis."
(PR newswire � 11/18/09)

read more...

Put Trading Swells on J. Crew Group Ahead of Earnings

(11/18/2009 11:05:48 AM)

Retailers continue to line up for the earnings confessional, and one particular high-flyer is slated to release its quarterly report next week. J. Crew Group Inc. (JCG: sentiment, chart, options) is known for its preppy fashions, including jeans, khakis, and other basic (but often pricey) items sold to young professionals. J. Crew sells through its catalogs, Web sites, and some 300 retail and outlet stores in the U.S. under the J. Crew, crewcuts (for kids), and Madewell banners. Madewell, launched in 2006, is a women's-only collection of hip, casual clothes.

read more...

Drilling Down on Rowan Companies' Rally Prospects

(11/18/2009 10:00:00 AM)

Rowan Companies Inc. (RDC: sentiment, chart, options) performs contract drilling of oil and gas wells. Its fleet consists of 22 jack-up rigs and 32 land-drilling rigs. The company operates primarily in the Middle East, Texas, the Gulf of Mexico, and the North Sea.

read more...

Drug Delay Prompts Put Trading on ISIS Pharmaceuticals, Inc. (ISIS)

(11/17/2009 1:50:13 PM)

Bearish option bettors have virtually blitzed ISIS Pharmaceuticals, Inc. (ISIS: sentiment, chart, options) today, with intraday put volume skyrocketing to nearly 38 times the norm. The pharmaceutical firm this morning confessed that it's delaying plans to seek approval for experimental drug mipomersen by nearly a year, from mid-2010 to mid-2011.

read more...

Pre-Earnings Option Activity Accelerates on Sears Holdings Corporation

(11/16/2009 1:55:56 PM)

Sears Holdings Corporation (SHLD: sentiment, chart, options) has been a hot topic on both sides of the options aisle today, as investors race to place their bets ahead of the retailer's looming turn on the earnings stage. According to Thomson Reuters, the firm is expected to report its third-quarter figures before the opening bell on Thursday, Nov. 19.

read more...

Options Traders Bulk Up on Puts on Software Vendor

(11/13/2009 12:34:23 PM)

Options players are placing some heavy bets that salesforce.com inc. (CRM: sentiment, chart, options) is going to suffer a disappointing earnings report next week, as traders load up on puts. The International Securities Exchange (ISE) has reported 2.7 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 93.8% of all those taken during the past year. In other words, puts are significantly more popular than calls among traders.

read more...

Hopes Are Riding High for GameStop's Earnings

(11/13/2009 11:35:33 AM)

The video game sector is struggling. U.S. video game sales dropped by 18% in October compared to the same period last year, according to the latest data from NPD Group. Meanwhile, analysts had forecast a more modest decline of 11%.

read more...

Options Stew: A Taste of the Week's Spiciest Plays

(11/13/2009 10:55:42 AM)

Betting on a Short-Term Bounce for First Solar, Inc. (FSLR)

(11/12/2009 3:15:41 PM)

Call traders have been fond of First Solar, Inc. (FSLR: sentiment, chart, options) today, despite the solar concern's retreat into the red. In afternoon trading, the security has already seen roughly 18,000 calls cross the tape � nearly tripling its average intraday volume of fewer than 6,250 contracts.

read more...

SchaeffersResearch.com can alert you to new articles containing your favorite authors, ticker symbols or keywords. Enter your favorite authors, ticker symbol or keyword and click go.

Today's Most Popular Stories

Read

Emailed

Editor's Pick

Options Edge: CF Industries, Solarfun Power, E TRADE Financial, and Conseco, Inc. 11/19/2009 9:29 AM

Options Report: Buying Opportunities Among Internet Retailers 11/19/2009 3:30 PM

Schaeffer's Media Outtake: Thoughts on Hedging, Volatility 11/19/2009 4:15 PM

Market Recap: Chipmakers Blaze the Path Lower on Sector Downgrade 11/19/2009 4:17 PM

Featured Companies

Starbucks Corp. (SBUX)

Add to Watchlist

Add Alert

Receive FREE access to Schaeffer�s

premier online options magazine!

Podcasting

Videocasting

	Schaeffer's Daily Q&A: What Is Put Selling Nov 20 2009 4:12 PM
Options Stew: A Taste of the Week's Spiciest Pl... View More...

Partner Center

<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=166;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=166;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=167;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=167;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=168;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=168;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=169;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=169;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>
<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=174;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=174;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/fo.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=171;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=171;s=0;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=172;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=172;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/fo.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=173;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=173;s=0;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>

Monday Morning Outlook:
Prepare for the investing week ahead. Every week, Bernie and his staff provide you with their insight about what has happened and, more importantly, what will happen in the market. We dig deep and show you what's happening behind the scenes, and tell you which indicators are predicting major market moves.

Market Recap:
At the end of every market day, we review the trading day in detail, covering major events and key market developments. Don't miss this critical, timely and insightful report.

Opening View:
Every morning, our research staff analyzes the prior day and the overnight markets, and monitors the morning wires to give you an accurate preview of the day to come. delivered to your inbox before the opening bell.

First Name Add your first name Last Name Add your last name Email Add a valid address Password Min. size 4 chars

I would like to be contacted periodically by Schaeffer's Investment Research concerning its own products and services, and those of carefully selected advertisers. I understand that I can opt-out of further messages at any time.

� 2009 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242
Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com