Options Trade – Starbucks Corporation (NASDAQ:SBUX) Calls 
Saturday, April 19, 2014

**OPTIONS TRADE: Buy the SBUX Jul 2014 70.000 call (SBUX140719C00070000) at or under $3.00, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $6.00.

by Ian Harvey

April 19, 2014


Coffee retailer Starbucks Corporation (NASDAQ: SBUX) is slated to release its fiscal Q2 results after the market close on April 24. Starbucks has struggled to keep pace with the broader market in 2014, with the stock having lost 9.3% since the start of the year. Analysts expect to see the company report earnings of $0.56 for its second quarter.

While Starbucks has underperformed the market so far this year, an upbeat earnings report could easily help the stock erase most of its year to date losses. Back in January the company reported mixed results as far as beating estimates went, but in terms of sales it was their best first quarter in history. It posted better than expected earnings, but revenues came in slightly under the consensus estimate. On a year over year comparison, earnings rose by 24.6% while revenues jumped 11.8%. It also opened an additional 417 locations during the quarter, taking its total number to over 20,000.

Company Details

Starbucks Corporation is a roaster, marketer and retailer of coffee operating in 60 countries. The Company purchases and roasts coffees that it sells, along with handcrafted coffee, tea and other beverages and a variety of fresh food items, through Company-operated stores. It also sells a variety of coffee and tea products and licenses its trademarks through other channels, such as licensed stores and national foodservice accounts.

As of September 30, 2012, it operated 9,405 Company-operated stores and 8,661 licensed stores. It has four segments: Americas; Europe, Middle East and Africa (EMEA); China/Asia Pacific (CAP), and Channel Development.

In addition to its flagship Starbucks brand, the Company’s portfolio also includes Tazo Tea, Seattle’s Best Coffee, Starbucks VIA Ready Brew, Starbucks Refreshers beverages and the Verismo System by Starbucks.

In February 2013, Tata Coffee Ltd and the Company inaugurated a roasting and packaging plant in Karnataka.

Key Statistics for SBUX

Current P/E Ratio (ttm) 15.0251
Estimated P/E(09/2014) 26.3128
Relative P/E vs. SPX 0.8737
Earnings Per Share (USD) (ttm) 4.6688
Est. EPS (USD) (09/2014) 2.6660
Est. PEG Ratio 1.4805
Market Cap (M USD) 53,026.39
Shares Outstanding (M) 755.90
30 Day Average Volume 5,678,334
Price/Book (mrq) 10.8109
Price/Sale (ttm) 3.4526
Dividend Indicated Gross Yield 1.48%
Cash Dividend (USD) 0.2600
Dividend Ex-Date 02/04/2014
5 Year Dividend Growth -
Next Earnings Announcement 04/24/2014

Technical Analysis

Starbucks Corp. has a 1-year low of $57.50 and a 1-year high of $82.50. The stock has a 50-day moving average of $72.89 and a 200-day moving average of $76.17.

The company has a market cap of $53.065 billion and a price-to-earnings ratio of 447.34.


Starbucks Corp. last announced its earnings results on Thursday, January 23rd. The company reported $0.71 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.69 by $0.02. The company had revenue of $4.24 billion for the quarter, compared to the consensus estimate of $4.29 billion.

During the same quarter in the prior year, the company posted $0.57 earnings per share. The company’s quarterly revenue was up 11.8% on a year-over-year basis.

Analysts expect that Starbucks Corp. will post $2.66 EPS for the current fiscal year.

For a clue as to what to expect in the new earnings, take a look back at Krispy Kreme's (KKD) report just a few weeks ago. Krispy Kreme had a good quarter, reporting 33% earnings growth, and 3.3% revenue growth. Earnings were a penny worse than expected, but revenues were higher than expected, and overall it was still a good quarter for the company. Therefore, expect a similar report for Starbucks as earnings and revenues should grow nicely.

Analysts Opinions

Starbucks Corp. (NASDAQ:SBUX) had its price objective hosited by Barclays from $78.00 to $81.00 in a report released on Tuesday, 15th April, 2014. Barclays currently has an equal weight rating on the stock.

Also, the company has been the subject of a number of research reports:-

• Analysts at RBC Capital cut their price target on shares of Starbucks Corp. from $90.00 to $88.00 in a research note on Tuesday, March 11th.

• Separately, analysts at TheStreet upgraded shares of Starbucks Corp. from a hold rating to a buy rating in a research note on Wednesday, February 26th.

• Finally, analysts at Longbow Research initiated coverage on shares of Starbucks Corp. in a research note on Friday, February 7th. They set a buy rating on the stock.

Seven investment analysts have rated the stock with a hold rating and twenty-four have assigned a buy rating to the company. The company currently has an average rating of Buy and an average price target of $84.23


Starbucks is a dominant coffee house with enormous potential ahead. With forward estimates or store targets well within reach, backed by its quality premium products, constant innovation, international expansion and solid fundamentals, it certainly deserves a spot in your portfolio. Moreover, the stock has corrected sharply of late, down by more than 14%, and with results due this week, it forms a strong buying opportunity. The company should outperform the boarder market in both the short- and long-term.

Therefore, based on the facts above the following options trade is recommended…..

**OPTIONS TRADE: Buy the SBUX Jul 2014 70.000 call (SBUX140719C00070000) at or under $3.00, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $6.00.

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