Starbucks Options Volume Jump as Initial Results Signal 'Tough Road' Ahead
$Starbucks (SBUX.US)$ options volume jumped Wednesday after the company's preliminary fiscal fourth quarter results disappointed Wall Street, highlighting the challenges that new CEO Brian Niccol faces as he attempts a turnaround for the coffee chain.
Total volume so far reached more than 115,200 call and put options across 16 expiration dates that stretch through Jan 15, 2027 after the coffee's stock price declined as much as 3.2%. The share price decline pushed many of the contracts out of the money. Trading was more than quadruple the previous day's volume and triple the 20-day average, according to Bloomberg data.
(To see Starbucks' options chain, click here. For the US options market, click here.)
While the share price trimmed its decline to just 0.9% by 12:31 p.m. in New York, the volatility is also giving holders reasons to rethink their initial trades, adding to the volume.
The most active Starbucks contract is the put option giving the holders the right to sell the stock at $95 in two days. Demand for such option that could protect the holder from further downside increased. The shares are now trading just less than a dollar above that strike price, increasing the probability that the contract could be in-the-money before it expires.
The stock price declined after the coffee chain reported that revenue for the three months ended Oct. 1 was estimated at $9.114 billion, missing analysts' expectations for a third straight quarter as sales in the U.S. and China declined. On average, analysts expected revenue to reach $9.202 billion, according to estimates compiled by Bloomberg.
The stock price declined after the coffee chain reported that revenue for the three months ended Oct. 1 was estimated at $9.114 billion, missing analysts' expectations for a third straight quarter as sales in the U.S. and China declined. On average, analysts expected revenue to reach $9.202 billion, according to estimates compiled by Bloomberg.
The company also said it's suspending its fiscal year 2025 guidance, reducing Wall Street's visibility on the progress of Starbucks' turnaround efforts under its new chief executive officer.
(To see Starbucks financial data on the website, click here.)
The company's decision to suspend guidance doesn't help investors seeking clarity over the "tough road" ahead that Starbucks need to navigate, Bloomberg quoted Jefferies analyst Andy Barish as saying.
“Despite our heightened investments, we were unable to change the trajectory of our traffic decline, resulting in pressures in both our top-line and bottom-line," Starbucks Chief Financial Officer Rachel Ruggeri said in the company's financial release after the market closed Tuesday. “We are developing a plan to turn around our business, but it will take time."
Starbucks said its board approved an increase in its quarterly cash dividend to 61 cents, from 57 cents, a move that the CFO said, was meant to "amplify our confidence in the business, and provide some certainty as we drive our turnaround."
Still, that wasn't enough to assuage Wall Street analysts, including Morgan Stanley's Brian Habour who described the results as "remarkably poor." The financial results reminded investors of "how much wood there is to chop," the analyst was quoted by Bloomberg as saying.
"We think sales can rise as it laps weak results," Bloomberg Intelligence analyst Amir Islam said in a note Tuesday The preliminary revenue and earnings miss "wasn't a surprise, given a vast number of US sales initiatives made execution difficult and there wasn't a plan to compete with lower-cost chains in China."
Despite the disappointing preliminary results, only two of the 15 technical indicators tracked by moomoo are showing negative signals, while 11 are neutral. The remaining two are bullish.
The stock's decline Wednesday put the price below the middle line of the Bollinger Band, a signal to some who study charts that the stock could be trending bearish. It even traded momentarily below the lower line, before bouncing back to trim earlier losses.
Still, the amount of funds flowing into the stock outpaced withdrawals by $69.46 million. That helps lower this month's net outflows, capital trend data tracked by moomoo showed.
Still, the amount of funds flowing into the stock outpaced withdrawals by $69.46 million. That helps lower this month's net outflows, capital trend data tracked by moomoo showed.
Share your thoughts on Starbucks' prospects in the comments section. And if you have a price forecast, please vote below.
Options trading entails significant risk and is not appropriate for all customers. It is important that investors read Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request. Moomoo does not guarantee favorable investment outcomes. The past performance of a security or financial product does not guarantee future results or returns. Customers should consider their investment objectives and risks carefully before investing in options. Because of the importance of tax considerations to all options transactions, the customer considering options should consult their tax advisor as to how taxes affect the outcome of each options strategy. All company analysis information is provided by third parties and not by Moomoo Financial Inc. Any illustrations, scenarios, or specific securities referenced herein are strictly for informational purposes and is not a recommendation. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal. This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Furthermore, there is no guarantee that any statements, estimates, price targets, opinions or forecasts provided herein will prove to be correct.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Moomoo Senior News and Community Manager
Former editor at Bloomberg, ex-commentary editor at Lazard. Posts aren’t investment advice. Views are just mine.
5756Followers
16Following
16KVisitors
Follow
Zoooi3 :![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Laine Ford : don't know what to say about it stock hereso I have no comment
73638957 : SBUX has no business to be up more than 27% since getting the new CEO.
Aconite Bloom : what could be causing this
anchovy3 : This company won’t become more valuable until they improve their product. Lots of chains with much higher standards. Can’t just rely on diabetes in a blender to get people in the door anymore