Starbucks Breaks Out To All-Time High

Starbucks Corp. (SBUX) broke out above 2019 resistance last week and rallied to an all-time high above 100. The company reaffirmed fiscal year 2021 earnings-per-share (EPS) guidance in an ‘Investors Day’ presentation and raised projected growth for years 2022 through 2024. Stronger than previously forecast metrics are expected in both North American and global operations, with China comparable store sales growing 2% to 4% annually, compared to previous 1% to 3% guidance.

Starbucks Raises 2021 – 24 Guidance

The coffee giant beat Q4 2020 earnings in October by a wide margin but fell after issuing Q1 guidance well below estimates. Revenue contracted a sizable 8.1% year-over-year while both North American and global comparable sales fell by wide margins. Higher average ticket size offset losses to some extent but the weak revenue signaled continued fallout from the COVID-19 pandemic and in-house capacity restrictions around the world.

Telsey Advisory Group analyst Bob Derrington raised the price target to $102 after last week’s presentation, noting “Starbucks hosted its biennial Investor Day in a virtual presentation that included senior management members who discussed a number of key operating and financial metrics in support of its Growth at Scale agenda, emphasizing responsible growth that includes doing the right thing for both people and the planet within its longer-term plan”.

Wall Street And Technical Outlook

Wall Street consensus has deteriorated in 2020, with the current ‘Moderate Buy’ rating based upon 9 ‘Buy’ and 11 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets now range from a low of $82 to a Street-high $120 while the stock closed Friday’s U.S. session more than $3 below the median $106 target. Higher targets and fresh upgrades are likely in response to last week’s bullish guidance.

Starbucks topped out just below 100 in July 2019, following a multiyear uptrend, and entered a decline that broke a trading floor in the mid-80s during the first quarter’s pandemic decline. It found support at a 20-month low near 50 in March, giving way to a vertical recovery wave that reached the prior high in mid-November.  The rally into December has completed a cup and handle breakout, forecasting a measured move into the 150 level.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.