Is Starbucks Stock A Buy At All-Time Highs?

Starbucks

With shares of Starbucks (NASDAQ:SBUX) trading around $62, is SBUX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Starbucks is a roaster, marketer ,and retailer of coffee operating worldwide. 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 its stores. It also sells a variety of coffee and tea products and licenses its trademarks through other channels, such as licensed stores and national food service accounts. 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. Starbucks has developed an amazing reputation over the last several years, which has generated a lot of buzz for its products. Consumers continue to enjoy Starbucks branded products around the world which will surely lead to rising profits.

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T = Technicals on the Stock Chart are Strong

Starbucks stock has witnessed a powerful bid extending back to early 2009. The stock is now digesting gains slightly below all-time high prices so it may need a little time to breathe here. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Starbucks is trading above its rising key averages which signal neutral to bullish price action in the near-term.

SBUX

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Starbucks options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Starbucks Options

24.59%

90%

88%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.