Schaeffer's Outside the Box Blog
Stocks quoted in this article:

As you all probably know by now, Starbucks Corporation (NASDAQ:SBUX) isn't too thrilled about Comedy Central comedian Nathan Fielder's parody coffee joint, Dumb Starbucks, which attracted an absurd number of customers this past weekend. Literally, people with nothing better to do than wait in an hour-long line for free coffee flocked to the Los Feliz, Calif., location, which argued its legality under parody law. To their dismay, though, the shop was shut down by the health department on Monday for operating without a permit. (Don't worry, these would-be customers' desperate desire to fit in will have them mindlessly obsessing over a new "hip" trend soon enough.)

If I were SBUX, I would take the store's success as a compliment. The fact that Fielder was able to bring in herds of customers by mimicking SBUX's logo, menu, and appearance shows how truly devoted SBUX patrons are. Or, maybe that is exactly what scares the global coffee giant -- others might be catching on how to convince society what is cool or popular, with no merit whatsoever. Simply create a logo, slap on expensive price tags, and instill panic among the sheeple -- ahem, I mean people -- that without it, they are nobody.

Still, I don't think SBUX has anything to worry about. Even the big shots on Wall Street think highly of the company. Though the shares are down more than 9% from their record high of $82.50, tagged on Nov. 6, 18 of the 24 covering analysts maintain "buy" or better endorsements, and not a single "sell" or worse suggestion has been dished out. Plus, the average 12-month price target of $87.96 denotes expected upside of 17.5% from the shares' current perch at $74.85. Not to mention, short-term option players have rarely been more call-heavy toward SBUX as they are now, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.66 ranks lower than 98% of comparable readings from the past year.

On the other hand, maybe Starbucks Corporation (NASDAQ:SBUX) feels threatened, considering the company on Jan. 23 announced slower same-store sales growth for the fiscal first quarter, and forecast gloomier-than-expected earnings for its second quarter. As I mentioned earlier, SBUX has been in a technical rut over the past three-plus months. Should this downward trajectory continue, the bulls of Wall Street and Main Street may unwind their current positions, which could serve as contrarian headwinds.


permanent link
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

Partner Center

© 2014 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

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.