• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

After All These Years, Starbucks Still Creates a Buzz

SBUX's recent caffeinated cup-and-handle pattern suggests that the stock could grind its way to a fresh year-to-date high.
By ED PONSI
Sep 15, 2022 | 10:00 AM EDT
Stocks quotes in this article: SBUX

When a company begins to coast and live off of its past accomplishments, it's often the beginning of a long, slow decline. While a hungry upstart works tirelessly to gain an edge, a successful, once-innovative company can gradually become complacent. Once-prominent names such as Blockbuster Video and Sears, Roebuck & Co. are just two examples of this phenomenon.

Earlier this week, we learned that Starbucks (SBUX)  is anything but complacent. The Seattle-based coffee retailer unveiled an ambitious plan to reinvent itself, and projected annual earnings growth of 15% to 20% per year for the next three years.

The company announced plans to build 2,000 new U.S. locations over the next three years, and said new technologies and efficiencies would lead to same-store sales growth of 4% to 5%. News of the ambitious plan led to a breakout for the stock, as Starbucks closed at a six-month high.

Starbucks is the largest retail coffee chain in the U.S., with over 15,000 locations, so it's only fitting that Wednesday's breakout took the form of a cup and handle pattern (curved black lines). Starbucks blasted out of the bullish formation on nearly quadruple its average daily volume (arrow).

Chart by TradeStation

The pattern suggests that the stock could grind its way to a fresh year-to-date high. Starbucks has major resistance in the $117 area, left over from November and December of last year (black dotted line).

Wednesday's breakout is remarkable, because it occurred just one day after the major indexes suffered their worst session in over two years. Despite this, the stock broke above its 200-day moving average (red), closing well above that key indicator for the first time since early January.

Tuesday's bloodbath, which saw the S&P lose 4.3% and the Nasdaq Composite tumble 5.2%, was the worst individual session since June 11, 2020. The selling was inspired by Tuesday's consumer price index report, which showed prices rising by 8.3% compared to last year.

Starbucks' success comes down to one key component -- brand loyalty. Coffee is available everywhere, and almost every coffee vendor sells it for less than Starbucks.

But when it comes to Starbucks, price is not the issue. The people who want this product are willing to pay up, and would probably pay more if asked. Combine that loyalty with a plan to make the company even more innovative and efficient, and you have a great recipe for success.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Ponsi was long SBUX.

TAGS: Investing | Stocks | Beverages

More from Stocks

Rule of the Week: Don't Fight the Fed

James "Rev Shark" DePorre
Jan 30, 2023 4:33 PM EST

We've got a mix of earnings, a rate decision and nervous investors.

3 High-Yield Dividend Tech Stocks for Income Investors

Bob Ciura
Jan 30, 2023 2:35 PM EST

Now could be a very good time to capitalize on sustainable income streams from a sector where dividend income is scarce.

Checking on AMD's Stock Charts Ahead of Tuesday's Earnings

Bruce Kamich
Jan 30, 2023 2:10 PM EST

Here's what to avoid for now.

Is This Mid-Cap Oil Stock Ready to Capture Its 'Big Winner' Potential?

Bruce Kamich
Jan 30, 2023 1:29 PM EST

Here's our technical strategy for trading oil producer Denbury.

Don't Fight the Fed? What About When the Fed Is Fighting Its Own Past?

Peter Tchir
Jan 30, 2023 1:00 PM EST

The biggest risk to markets in the coming weeks is the realization that the Fed has already gone far too far, and the economy is rolling over.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:27 PM EST REAL MONEY

    LIVE EVENT: Chris Versace and "Sarge" Guilfoyle Share Their Stock Market Insights

    This Monday, Jan. 30, at 12 p.m., our very own exp...
  • 11:48 AM EST REAL MONEY

    Watch Doug Kass on the Daily Rundown!

    In today's Action Alerts PLUS Daily Rundown, Doug ...
  • 11:03 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend On Real Money

    It's time to start using this power to build great...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login