SBUX is having its worst day in more than a year, down about 3% on a research report from a brokerage firm that I have never heard called ITG suggesting that the coffee seller may be seeing slowing sales growth.
Year to date, SBUX has been the poster-child for strong consumer discretionary spending, up 44% on the year with a very orderly and steady rise with uptrend channel that did not have a peak to trough draw-down of more than 7.5%.
The ytd chart (below) shows the series of higher highs and higher lows and what amounts to be the rising 50 day moving average (purple line) serving as healthy support the whole way up since last closing below it back in February.
Today’s breakdown on seemingly unsubstantiated research is interesting to me because it is on good volume and comes shortly after SBUX, a market leader, failed to make a new high with the broad market indices in the last week.
The second chart of the same period above shows a couple very key technical support levels to keep and eye on. The next real level of support is $75, which was the previous closing low back in mid Sept, before the market took off on its latest leg higher. If it gets through there, traders will be very focused on the 200 day moving average which sits just below the VERY important breakout level from late July after the company issued a beat and raise.
SBUX is expected to grow earnings 20% next year on sales growth of about 12%, with much of that growth coming from overseas. Investors have been willing to pay a premium multiple (29x next year) given the expected growth in emerging markets like China that should serve as the driver going forward.
I suspect that investors who are positioning for a reflation in global growth in 2014 will have stocks like SBUX on their end of the year shopping lists on any sustained weakness, $75 should be the first real test of wills for those long or looking to get long.