NEW YORK (TheStreet) -- Starbucks (SBUX) - Get Starbucks Corporation Report released fiscal first-quarter earnings Thursday that got traders percolating, reporting in-line earnings per share, revenue and guidance. Operating margins and comp-store sales growth impressed investors, who pushed the stock higher by almost 4% in after-hours trading.
Investors seem to be breathing a "sigh of relief," said Nick Setyan, senior equity analyst at Wedbush Securities. There was a lot of caution heading into this report; now that everything appears to going smoothly, investors feel more comfortable staying long the stock, he said. Based on its historical valuation, shares appear to have upside because improving operating margins are sustainable. He has a buy rating on the stock with a $90 price target.
Shares of Starbucks usually trade at 24 times forward earnings estimates but currently trade at just 20 times forward earnings, said Dan Nathan, co-founder and editor of riskreversal.com. There appears to be upside in the stock because the company has "great growth," he added. Investors should buy the stock on a pullback.
Between McDonald's (MCD) - Get McDonald's Corporation (MCD) Report , which reports earnings on Friday before the open, and Starbucks, Steve Grasso, director of institutional sales at Stuart Frankel, says he would rather buy McDonald's. McDonald's has an attractive setup on the long side, he reasoned.
McDonald's has done nothing but disappoint investors for the last several quarters, according to Guy Adami, managing director of stockmonster.com. He is a buyer of Starbucks near current levels. He also said investors can look for opportunities in stocks that are rangebound.
For instance, shares of Bank of America (BAC) - Get Bank of America Corp Reportclimbed over 4% on Thursday but have have been stuck between $15 and $18.50 for the past year. Investors should consider buying near the bottom of that range, Adami said.
Many financial stocks still look attractive despite the sector's 2.5% rally, said Karen Finerman, president of Metropolitan Capital Advisors. Investors shouldn't feel like they've missed out on the rally.
Shares of United Airlines (UAL) - Get United Airlines Holdings, Inc. Report and Southwest Airlines (LUV) - Get Southwest Airlines Co. Report rose 4.5% and 8.4%, respectively, after both companies reported earnings. Southwest beat on revenue and earnings estimates while United Airlines missed on earnings per share expectations and reported in-line revenue results.
Investors should stick with domestic airline stocks if they're going to be invested in the industry, Nathan said. The strong U.S. dollar will hurt companies like United Airlines, because of its international routes.
One domestic airline stock that's finally catching up to its peers is JetBlue Airways (JBLU) - Get JetBlue Airways Corporation Report , which climbed 7.9% on Thursday. However, investors should consider taking profits, Adami said, especially if oil prices begin to stabilize.
Grasso reiterated the "taking profits" mentality for the sector, cautioning investors that the upside for airline stocks appears limited.
Box (BOX) - Get Box, Inc. Class A Report is expected to go public on Friday, selling 12.5 million shares between $11 and $13. The company has a lot of big-name investors, including Andreessen-Horowitz and Salesforce.com (CRM) - Get salesforce.com, inc. Report , among others.
But according to Rett Wallace, CEO of Triton Research, retail investors should avoid the stock. While the big investors were able to invest in the company when it was private, its business looks unattractive. Box operates in the cloud storage industry, which is seeing margin compression and pricing pressure due to the aggressive push being made by larger companies including Apple (AAPL) - Get Apple Inc. (AAPL) Report , Amazon (AMZN) - Get Amazon.com, Inc. Report , Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report , Google (GOOGL) - Get Alphabet Inc. Class A Report and International Business Machines (IBM) - Get International Business Machines (IBM) Report .
It's pretty hard to compete with some of those companies considering how large they are, Nathan said. Box will likely see margin pressure.
"I'd rather buy Amazon," Grasso said. The stock is starting to perform better and its cloud and Web services businesses are also performing well.
For their final trades, Grasso is buying Disney (DIS) - Get Walt Disney Company Report and Finerman is a buyer of United Rentals (URI) - Get United Rentals, Inc. Report . Nathan is selling the iShares 20+ Year Treasury Bond ETF (TLT) - Get iShares 20+ Year Treasury Bond ETF Report and Adami is buying Esterline Technologies (ESL) .
-- Written by Bret Kenwell