Technically Speaking, Starbucks Is Facing Some Short-Term Resistance
Starbucks Corporation (NASDAQ: SBUX) shares have rallied nicely off of the October lows, but are now facing critical upside "correction resistance" just above current levels.
Do the company's fundamentals provide enough of a coffee rush for the stock to blow through resistance? Or will the bears win this battle on the power of technical resistance?
What The Bulls See
- A 1.6 percent dividend yield with a low 38 percent payout ratio.
- A cheap price-to-sales ratio of 3.54.
- Gross profit margins of 16.98 percent that spun off $607 million in annual operating cash flows.
- A return on assets of 15.68 percent and a return-on-equity ratio of 42.39 percent.
- Clean balance sheet metrics: A current ratio of 1.37 and a debt-to-equity ratio of 38.84 percent.
What The Bears See
- Some expensive valuation metrics: a PE of more than 20 with estimated 2015 growth in revenues and EPS of 10.30 percent and 16.9 percent, respectively, and a price-to-book ratio of 11.06.
The Technical Take
Technicians note that Starbucks may be nearing a critical upside "correction resistance" level at $78.90. If the stock can conquer that level on a closing basis, a run up to $82 may be in the cards. A failure to eclipse the $78.90 level on a closing basis, however, may lead to a move down to the $67.83 projected support level.
Much of the Starbucks short-term picture depends on how the stock does at the key resistance level.
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