"Starbucks Corporation (NASDAQ: SBUX) is poised to make a comeback," says Mark Skousen in his premium trading service, The Turnaround Trader.
The stock is also a technical buy recommendation from Melvin Pasternak in his Swing Trader newsletter, which forecasts that a new uptrend is emerging for the stock.
Mark Skousen explains, "Starbucks, the world's largest coffee chain, is starting to grow again after a lackluster year of slow sales and earnings gains. The stock had been trading as high as $40 a share at one point before its pull back.
"Now, the company is controlling costs, while expanding its services and products. For example, new breakfast sandwiches are expected to add an estimated $200 million a year to company revenues.
"In fiscal 2009, half of Starbuck's stores will be serving breakfast to generate additional sales of $420 to $450 million. The company is adding 2,000 stores each year. Revenues and earnings are rising again, and the stock is reasonably priced at 25 times next year's earnings.
"I expect that Starbucks will recover sharply when the market does. For those willing to take a gamble, consider buying the January $35 calls. The options are cheap."
Melvin Pasternak adds, "Technically, Starbucks peaked near $40 in November 2006 and then began a long slide that took the shares down to near $25 in June. Since that time, the stock has begun a gradual uptrend.
"The stock recently broke above its intermediate downtrend line and pierced above its declining 10-week moving average. SBUX had already penetrated its relative strength downtrend line and drawn even with the line's moving average for the first time in nine months.
"The indicators suggest the worst is over for SBUX, and a trader buying it at this level is picking up the stock as it is turning around. I think this will need to be a patient trade, but should also carry little risk.
"ADX is still on a sell signal, but MACD has just given a buy signal, joining CCI and stochastics. RSI is trending higher from oversold levels. My target on SBUX is $34.45."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.
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Reader Comments (Page 1 of 1)
8-30-2007 @ 4:51PM
Wily said...
Oh yeah, the middle class is quickly shrinking and you think they will continue to invest in over priced coffee? Trading good jobs for bad jobs and losing their house and/or car? They won't give up coffee but they will give up $3.00 coffee. It'll be the first to go.