Starbucks Outlook - A Bearish Setup with Weak Technicals and Mixed Analyst Opinions

Market Snapshot

Takeaway: Starbucks (SBUX.O) is currently in a freefall with a recent price decline of -3.30%, and the technical backdrop suggests caution with an internal diagnostic score of just 2.69 (0-10).

News Highlights

Recent headlines in the hospitality and travel sector are mixed for Starbucks:

• Hilton's expansion in Saudi Arabia shows the sector remains active, but Starbucks isn't directly benefitting from this trend.
• European hotels suing Booking.com over pricing rules could affect broader travel spending patterns, but Starbucks is not mentioned in these developments.
• Choice Hotels' price target cut by Morgan Stanley highlights a broader bearish tone in the sector, which may pressure Starbucks' stock as well.

Analyst Views & Fundamentals

Analysts have a mixed but mostly neutral to slightly bearish stance on Starbucks, with a simple average rating of 3.62 and a performance-weighted rating of 3.55. While the ratings are consistent in sentiment, they don't align with the current downward price trend.

• Rating Consistency: Analysts appear consistent in their outlook, with 8 "Buy" and 5 "Neutral" recommendations from 12 active institutions over the last 20 days.
• Fundamental Performance:
  • EV/EBIT: 72.81 (Score: 1.00) — indicates a poor valuation multiple.
  • ROA: 1.21% (Score: 2.00) — weak profitability relative to assets.
  • Net income/Revenue: -0.70% (Score: 2.00) — suggests declining profitability.
  • Basic earnings per share YoY: -34.81% (Score: 2.00) — significant earnings contraction.
  • Total profit YoY: -35.72% (Score: 2.00) — continued profit declines.
  • Cash-UP: -1.82% (Score: 0.00) — poor cash flow health.
  • Long-term debt/Working capital: 7.09% (Score: 2.00) — manageable but not ideal leverage.
  • Inventory turnover days: 24.57 (Score: 3.00) — decent inventory efficiency.
  • Cash-MV: -1.83% (Score: 0.00) — weak cash-to-market value alignment.

Money-Flow Trends

Big money is cautious on Starbucks as well, with all major fund flow categories showing a negative trend. The overall inflow ratio is 0.495, with large and extra-large investors being especially bearish. This suggests that institutional money is moving out, or at least not committing, to a recovery in the stock.

Key Technical Signals

Starbucks is showing very weak technical signals according to our internal models:

• WR Oversold has an internal diagnostic score of 1.38, indicating low conviction in a potential rebound.
• RSI Oversold scores slightly better at 4.01, but the overall trend is still bearish.

Over the last five days, both indicators have shown up on key chart dates including September 10, 11, 12, and 15, indicating a repetitive weak pattern on the chart. The key technical takeaway is that momentum is clearly negative and the trend is of poor quality — our model advises to avoid the stock at this time.

Conclusion

Starbucks is facing a triple threat: weak fundamentals, bearish technicals, and cautious analyst sentiment. While the stock has historically performed well, current conditions suggest a pull-back or consolidation is likely. Investors should consider waiting for a clearer reversal signal before entering a position, especially with our internal diagnostic score at a concerning 2.69 and no strong indicators of a rebound.