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Starbucks Corporation (SBUX) Traders Gamble On an Earnings Miss

Starbucks Corporation will report earnings after next Thursday's close

by 4/16/2014 10:09 AM
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Option Brief: Starbucks Corporation (NASDAQ:SBUX) put volume accelerated once again on Tuesday, with the contracts trading at a 69% mark-up to the average daily pace. Although the stock's recent technical troubles warrant such skepticism, it seems a number of traders are eyeing the company's impending earnings report, hoping for a poor reaction to the numbers.

A healthy portion of put players targeted the May 67.50 strike, where 3,083 contracts changed hands. The bulk of these puts crossed on the ask side, and this strike notched the biggest overnight jump in open interest -- making it safe to assume that a new batch of bearish bets was purchased. Based on the volume-weighted average price (VWAP) of $1.55, breakeven at the close on Friday, May 16, when the options expire, is $65.95 (strike minus the VWAP).

While SBUX hasn't traded south of $65.95 in more than nine months, the equity has been making a series of lower lows of late, and yesterday closed south of its 320-day moving average for the second time in three sessions; prior to this, the shares hadn't breached the trendline since November 2012. What's more, the stock is off more than 15% from its Nov. 6 record peak of $82.50 to churn near $69.81.

Looking ahead, SBUX could continue to see technical headwinds, should the Street sour to the company's quarterly earnings results -- due at next Thursday's close. Over the past eight quarters, SBUX has averaged a one-day post-earnings gain of 1%, but one week out, that number swings to a 0.8% loss. Last quarter, in fact, the equity was down 2% one week after reporting earnings. For Starbucks Corporation's fiscal second quarter, Wall Street is calling for a per-share profit of 56 cents -- a nickel higher than the company's year-ago results.

Also on the fundamental front, Starbucks Corporation (NASDAQ:SBUX) announced last night it is relocating its headquarters to London from Amsterdam. The move comes amid criticism that the coffee concern has allegedly been paying too low of a tax rate in the Netherlands. Additionally, SBUX is reportedly in the running to take a major stake in SodaStream International Ltd (NASDAQ:SODA).


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