Stock Analysis | Starbucks Outlook - Bearish Momentum and Mixed Analyst Signals

Market Snapshot: A Weak Technical Outlook for Starbucks

Takeaway: Starbucks (SBUX) is currently showing a weak technical outlook with more bearish indicators (4) than bullish ones (1), signaling caution for investors. The internal diagnostic score for technical analysis is 4.09 out of 10, indicating weak momentum.

News Highlights: Trade Tensions and Industry Developments

• Trade War Risks: President Trump's new tariffs on Canada, Mexico, and China have raised concerns about increased costs for businesses, including those in the restaurant and hospitality sector. This could weigh on Starbucks' supply chain and margins.
• Industry Growth: Target Hospitality reported strong strategic growth in its first-quarter results. While not directly related to Starbucks, it reflects broader optimism in the hospitality sector, which could benefit SBUX in the long term.
• Restaurant Relief Efforts: DoorDash's $200,000 in grants to restaurants affected by wildfires shows a positive trend in the industry's support for small businesses, which could resonate with Starbucks' community-focused branding.

Analyst Views & Fundamentals: Mixed Signals and Weak Profitability

Average Rating Score: The simple average analyst rating for Starbucks is 3.62, while the performance-weighted score is slightly higher at 3.64. Although there’s a slight divergence between these two, the ratings are relatively consistent with 8 “Buy” and 5 “Neutral” calls in the last 20 days.

Price Trend Mismatch: The current price is down by -3.66%, which is not in line with the neutral to positive analyst expectations. This mismatch could create short-term uncertainty for investors.

Fundamental Insights: Starbucks’ fundamentals reveal mixed performance. Key metrics include:

• Return on Assets (ROA): 1.21% (model score: 3.03)
• Net Profit Margin (NPM): 4.38% (model score: 2.58)
• Total Profit (YoY growth rate): -35.72% (model score: 2.58)
• Net Profit Attributable to Parent (YoY growth rate): -35.16% (model score: 2.58)
• Long-Term Debt to Working Capital Ratio: 7.16% (model score: 3.03)

These metrics show declining profitability and a weak growth rate in net profits, which could concern investors, particularly given the high debt ratio. The internal diagnostic score for fundamentals is 2.54 out of 10, indicating poor performance.

Money-Flow Trends: Negative Pressure Across All Scales

Recent fund-flow patterns show a negative trend across all categories, with the internal diagnostic score for this data at 7.66 out of 10—indicating good performance in terms of capturing market sentiment.

• Large and Extra-Large Inflows: Both categories show negative trends and a 49.22% to 44.44% inflow ratio, suggesting that big-money players are cautious.
• Small and Medium Inflows: Also negative, with inflow ratios at 49.87% and 49.71%, respectively. This indicates that even retail and mid-sized investors are showing concern.

With negative trends and low inflow ratios across all sizes, it's clear that the market is not confident in Starbucks’ near-term direction.

Key Technical Signals: Bearish Biases and Volatility

Starbucks is currently in a volatile and directionless market state, with more bearish indicators than bullish ones. The internal diagnostic score for technical analysis remains at 4.09 out of 10, signaling caution.

• MACD Death Cross: This bullish bias indicator has an internal diagnostic score of 7.5, one of the strongest signals, but it's being countered by overbought and oversold conditions.
• WR Overbought and Oversold: Both have internal diagnostic scores of 3.03 and 2.58, indicating weak signals and market indecision.
• Ex-Dividend and Record Dates: These neutral signals have scores of 3.68, but their historical performance is mixed, with average negative returns.

Recent indicators by date include overbought conditions on August 14, multiple oversold signals from August 15 to August 21, and a MACD Death Cross on August 20. This pattern suggests a pullback might be imminent, but the overall trend remains weak.

Conclusion: Consider Waiting for a Pull-Back

With a weak technical score, negative money flows, and mixed analyst ratings, Starbucks (SBUX) appears to be in a challenging phase. While the MACD Death Cross suggests a potential short-term rebound, the overall trend is bearish. The internal diagnostic score for technical analysis (4.09) and fundamentals (2.54) both support a cautious stance.

Actionable Takeaway: Consider waiting for a more defined pull-back or a clearer technical breakout before entering a position. Watch for updates on earnings and any changes in the global trade environment, which could influence the stock’s direction.