Starbucks Gets Upbeat Analyst Attention Before Earnings

Keybanc does not see China being a headwind for Starbucks' quarterly report

Managing Editor
Oct 29, 2019 at 9:12 AM
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At least one analyst is expecting big things from Starbucks Corporation (NASDAQ:SBUX) in the earnings confessional this week. The coffee chain is set to report third-quarter results after the close tomorrow, Oct. 30, and KeyBanc envisions strong same-store sales growth of 5%, above the consensus view of 4.5% growth. The analyst also does not think the U.S.-China trade tensions will impact the report, noting how there was little effect for McDonald's (MCD) or Nike (NKE).

Today, Starbucks stock is up 0.3% in electronic trading. Since coming within a chip-shot of $100 back in July, SBUX has taken a 16% haircut, last seen at $83.60. However, the shares have found support at their 200-day moving average, a trendline that hasn't been breached in over a year. Plus, it helps that the equity has a history of outperformance in the fourth quarter.

Looking at Starbucks's earnings history also should give investors confidence. SBUX shares have moved higher the day after six of the last eight earnings releases, including an 8.9% surge back in July that netted new record highs. On average, the stock has moved 4% in the session after earnings, regardless of direction, looking back two years. This time around, the options market is pricing in a bigger 7.1% swing for the coffee stock.

Ahead of the event, options traders have been targeting calls. In the last 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 2.68 calls were bought to open for every put. This ratio is close to an annual high, indicating the rate of call buying relative to put buying has been much quicker than usual. Plus, the equity's Schaeffer's Volatility Scorecard (SVS) of 88 (out of 100) shows Starbucks's strong tendency to make bigger-than-expected moves during the past year, relative to what the options market was pricing in.

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