Starbucks a bargain at these prices?

Posted Mar 16th 2007 11:45AM by Brent Archer
Filed under: Major Movement, Analyst Reports, Analyst Upgrades and Downgrades, Starbucks (SBUX), Options, Technical Analysis, Bargain Stocks

Starbucks Corp. (NASDAQ: SBUX) opened at $30.31. So far today the stock has hit a low of $31.15 and a high of $30.05. As of 11:40 this morning, SBUX is trading at 30.50, up 0.91 (3.1%).

After hitting a one year high of 40.01 in November, the stock has been steadily declining over the past four months. Analyst Steven Kron of Goldman Sachs added SBUX to Goldman's conviction buy list, citing overblown fears and negative influences that are bringing the stock down into bargain buy territory. Friedman, Billings, Ramsey also reiterated its outperform rating for SBUX this morning. The technical indicators for SBUX have been bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $27.50 range. SBUX hasn't been below 27.50 since late 2005 and has shown support around 28.85. This trade could be risky if the company's recent slide continues, but at its current price, the fact that SBUX could be considered a bargain and bargain investors might help to keep the price over 27.50.

Brent Archer is an options analyst and writer at Investors Observer. (Free Subscription)

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.

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