Starbucks shares are trading near record levels after Cowen upgraded its price target

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Dec 29, 2020
  • Starbucks reported a further softening of U.S. comparable sales trends in December
  • The current share price does not provide an attractive entry point for the long term investors
  • As long the price is above $80, this stock remains in the bull market

Starbucks (NASDAQ: SBUX) shares have been moving in an uptrend last several months, and according to technical analysis, there is no risk of the bear market for now. Starbucks has a very good position in the market, but the current share price does not provide an attractive entry point for long-term investors.

Fundamental analysis: Cowen upgraded its price target on Starbucks to $112

Starbucks is an American multinational chain of coffeehouses and roastery reserves that operates over 30,000 locations worldwide in more than 70 countries. Starbucks continues to invest in the U.S. and Chinese markets by enhancing its digital platform, but the company is considering licensing some non-core markets.

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The covid pandemic also impacts the company’s business, and Starbucks reported a further softening of U.S. comparable sales trends in December after the 4% drop in November and a 3% decline in October. The company announced that a full comparable sales recovery is expected by the end of 2022, but analysts stay bullish on Starbucks despite this.

Analyst firm Cowen upgraded its price target on Starbucks to $112 from $110 in hopes that  SBUX’s strategy will drive U.S. sales upside.

“We remain confident in SBUX’s strategy to drive U.S. sales upside. Starbucks remains our favorite stock leveraged to the reopening, as we continue to see 2021 as a beat & raise story given our $2.90 est vs. $2.80 consensus. We appreciate the visibility in the 2022-24 financial outlook that surpassed expectations while recognizing SBUX typically guides conservatively,” said analyst Andrew Charles from Cowen.

Starbucks has announced that the number of stores should grow by 6% annually from F.Y. 2022 to F.Y. 2024, and the company has partnered with Nestle and Pepsi to increase its retail business. Starbucks has a very good position in the market, but the current share price does not provide an attractive entry point for long-term investors.

Starbucks shares are a little overvalued, and the company’s business will be affected by the COVID-19 pandemic certainly the next several months.

Technical analysis: Starbucks shares are trading near record levels

Starbucks shares are trading near record levels, and as long the price is above $80, this stock remains in the bull market.

Data source: tradingview.com

The critical support levels are $90 and $80, $110 and $115 represent the resistance levels. If the price jumps above $110 resistance, it would be a signal to trade Starbucks shares, and the next target could be around $115.

On the other side, if the price falls below $80, it would be a firm “sell” signal and maybe a trend reversal sign.

Summary

With a $123.9B market capitalization, this stock is expensive, in my opinion, but as long the price is above $80 support, there is no risk of the bear market. The covid pandemic impacts the company’s business, but Cowen upgraded its price target on Starbucks to $112 from $110.

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