The effect of the "change of coach" is immediate! Has Starbucks' stock price completely reversed? (2024.08.14)

Hello everyone, this week's 【Technical Tracking】 will analyze the world's largest coffee chain brand — $Starbucks(SBUX.US)$ 。

Hot Events

On August 13, 2024 (Tuesday), Starbucks suddenly announced a leadership change — Brian Niccol, the former CEO of the Mexican fast food chain Chipotle (CMG), will replace Laxman Narasimhan as CEO of Starbucks, officially taking office in September.

Upon hearing the news, Starbucks investors reacted like they had consumed too much caffeine, causing Starbucks' stock price to surge 24.5% in a single day, marking the largest single-day increase since the stock was listed in 1992.

Analysts believe that Starbucks is currently facing a series of challenges. Amid a continuous decline in stock price, some aggressive investors are pressuring the company to take measures to boost the stock price. Clearly, the market has cast a "vote of confidence" regarding Starbucks' decision to change leadership.

Niccol is a star CEO in the restaurant industry, possessing rich marketing expertise and having demonstrated leadership capable of reversing dire situations. He served as the CEO of Taco Bell, a subsidiary of Yum Brands, from 2015 to 2018, and has been the CEO of Chipotle since 2018. In addition, Niccol is currently a board member of Walmart, the world's largest physical retailer. During Niccol's tenure at Chipotle, the brand withstood operational pressures, increasing its annual profits fivefold, and the stock price soared by 773%, creating a remarkable growth story in the restaurant industry!

In contrast, Starbucks has noticeably underperformed against the S&P 500 Index in recent years. In the past few quarters, Starbucks' revenue growth has continued to slow down, even entering negative growth. According to analysts' forecasts, the company's current fiscal year (ending in September 2024) will see revenue growth of less than 2%.

Technical Analysis

Trend analysis:

The recent decline in Starbucks stock price began in May 2023 and continued until May 2024. During these 12 months, the stock price dropped by about 35%, reaching a two-year low of $71.2. In the following months, the Starbucks stock maintained a low level of fluctuation, forming a "double bottom" pattern on the daily chart.

Indicators interpretation:

With a surge of 24.5% on August 13, Starbucks stock price broke through the 200-day moving average (MA200) for the first time in six months. The 200-day moving average is generally considered a critical point between bull and bear markets, indicating that the market may be exiting a bear market and transitioning to a bull market.

During the bottoming process, the trends of the MACD and RSI Indicators were generally consistent with the stock price, also reflecting the "double bottom" pattern to some extent. However, as the RSI Indicator rose above 70, some signs of overbought conditions emerged in the market.

Focus Direction

From the daily chart, Starbucks stock price has officially broken through the "double bottom" pattern, suggesting that the future market may transition from bearish to bullish. However, based on the characteristics of the double bottom pattern, the target price can be roughly estimated at about $96, and the stock price has mostly reached this target price. Therefore, in the short term, the market may need some time for consolidation.

This content discusses technical analysis; other methods, including Fundamental Analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.

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