Is Sentiment Shifting After Starbucks Corporation's (SBUX) Earnings?

Option traders are picking up puts after Starbucks Corporation (NASDAQ:SBUX) gave a disappointing current-quarter outlook

by Kirra Fedyszyn

Published on Apr 22, 2016 at 12:23 PM
Updated on Jun 24, 2020 at 10:16 AM

Coffee giant Starbucks Corporation (NASDAQ:SBUX) is trading 5.5% lower at $57.07 after the firm's fiscal second-quarter revenue and its current-quarter outlook arrived below expectations. Heading into today's report, the shares were in positive year-to-date territory, enjoying recent support from their 30-day moving average. But today SBUX bulls may be hitting the bricks after that trendline failed to divert the stock's post-earnings drop.

SBUX Daily Chart

For starters, analysts are more than optimistic toward SBUX, with nearly 79% rating the stock a "buy" or better, and not a single "sell" in sight. In fact, Stephens raised its price-target on the equity by $2 to $58 this morning. Elsewhere, short interest on SBUX dropped nearly 14% during the most recent two-week reporting period, and now accounts for a mere 0.9% of the stock's total float.

Option traders have been unusually bullish, as well. The security's 10-day call/put volume ratio of 2.04 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 79th percentile on its annual range. And SBUX has a Schaeffer's put/call open interest ratio (SOIR) of 0.60  -- lower than 94% of all comparable readings ifrom the past year -- indicating near-term traders are more call-skewed now than at almost any other time in the last 12 months.

Today, SBUX options are trading at five times their typical intraday rate, and both stock and option volumes are in the 100th annual percentiles. However, puts are outnumbering calls so far, with buy-to-open action spotted on the July 50 put.

Buyers of these puts are betting that SBUX will continue to sell off, and drop below the round-number $50 level -- an area the shares haven't seen since last August -- over the next three months. If this change of sentiment continues in the options pits, or is echoed by
downgrades from the brokerage bunch, Starbucks Corporation (NASDAQ:SBUX) could be pressured even lower.

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