Take Advantage Of The Starbucks (SBUX) Drop
Jan 26th, 2009 | By Charles Delvalle | Category: Chart of the DayI think Starbucks sucks. They are needlessly everywhere. Even on Campgrounds (is anything left sacred anymore?). I think they are so horrible in fact; that the only reason I walk in there is to feel “frilly” with whip cream laced on top of my iced mocha. So naturally my obsession with Starbucks has led me to take a good, hard look at their stock price. And this is what I see…
Starbucks is Dropping Hard
After peaking back in October of 2006, Starbucks (NASDAQ:SBUX) dropped from $40 to just under $10 – a 75% drop in just a few years. The downward sloping trendline is clear as day, too.
Wouldn’t one think that the pain is over with? Maybe not.
You see Starbucks thrived in a time of easy credit. Easy credit allowed them to become profitable even though they had multiple storefronts within a few thousand feet from one another. But that won’t work anymore.
More people are making coffee at home – not drinking the overpriced frilly garbage they serve over at Starbucks. Granted, people still drink there. But now buy less – maybe by a third. Which could mean that Starbucks the company may have to shrink by a third just to survive.
Their earnings are already down 96%. And they have to shut down a lot more stores if they expect to adjust to the new economic reality we face. That means their shares are likely not to climb too much.
A good long-term short position could play out well here. By the time all is said and done, we might see Starbucks trade for under $4 a share.
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Charles Delvalle is a self-taught market-timing professional and value analyst who's followed and invested in the market for the past ten years. He uses a unique combination of technical and fundamental research to pinpoint rapid profit opportunities with stocks and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering undervalued, cash-rich companies. He frequently mocks government stupidities and points out the "inaccuracies (or lies, take your pick) that government reporting frequently dispels as "truth".
Very cool site,you are my kind of guy and if Che Guerva was here he
would make you a soldier in the revolution…
Its the 28th,2;30 pm and im’ sitting here wondering why SBUX is even up 0.39 going into erngs…
I want to short 600 shares at 9;50-9;55 and yet im’ a litlle hesitant as there is allways
a surprise,but im’ 1000% sure shes goin’ down,we’ll see…thnx Brioni
Che would be rolling in his grave as there are even a couple of Starbucks now in Buenos Aires.