Coffee Stock Drops Despite Cost-Cutting Initiatives

Coffee chain says it will take time to recover from coronavirus headwinds

Fernanda Horner
Jun 2, 2020 at 11:28 AM
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The shares of Starbucks Corporation (NASDAQ: SBUX) are down 0.8% at $77.68 this morning, after the company asked employees to further limit their hours or take unpaid leave until September. Though the popular coffee chain has regained nearly two-thirds of its comparable U.S. sales from the past year as it reopens stores, they said it will take time to fully recover from coronavirus-related restrictions and to see a growth in comparable sales again.

On the charts, the equity has been slowly climbing out of its mid-March lows near the $50 level, finding support at the 50-day moving average in early May. Before the pandemic took a hard hit on the restaurant industry, the shares were pushing against the $93 level, comparatively lower to the stock's all-time-high of $99.72 last July. Regardless, equity is maintaining an 18% lead for the quarter.

Analysts are hesitant toward SBUX coming into today, with 13 of the 22 in coverage sporting a tepid "hold" recommendation, and the remaining nine carrying a "buy" or better. Meanwhile, the 12-month consensus target price of $79.88 is a slim 2.8% premium to current levels.

Regardless, options traders may want to consider jumping aboard the coffee giant. Specifically, SBUX's Schaeffer's Volatility Index (SVI) of 19% ranks in the 86th percentile of its annual range, meaning options players are pricing in relatively low volatility expectations at the moment.  

 


 

 

 

 

 

 

 

 

 

 

 

 


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