Trade-Ideas LLC identified

Starbucks

(

SBUX

) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Starbucks as such a stock due to the following factors:

  • SBUX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $976.3 million.
  • SBUX has a PE ratio of 35.
  • SBUX is currently in the upper 30% of its 1-year range.
  • SBUX is in the upper 25% of its 20-day range.
  • SBUX is in the upper 35% of its 5-day range.
  • SBUX is currently trading above yesterday's high.
  • SBUX has experienced a gap between today's open and yesterday's close of 0.8%.

'Momo Momentum' stocks are valuable stocks to watch for a variety of reasons including historical back testing and price action. Market technicians refer to such stocks as being in a mark-up phase before a possible distribution period and price decline. Technical analysts and traders frequently find that the factors referenced above tend to create a temporary burst of strong wind in a stock's sail. Nevertheless, all successful traders must excel at maximizing gains while keeping losses to an absolute minimum. For that reason, the holding period on momo momentum stocks must always be a primary consideration, and this part of the puzzle is ultimately at the discretion of each individual's risk tolerance and portfolio risk management skills.

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TheStreet Recommends

More details on SBUX:

Starbucks Corporation operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company operates in four segments: Americas; Europe, Middle East, and Africa; China/Asia Pacific; and Channel Development. The stock currently has a dividend yield of 1.4%. SBUX has a PE ratio of 35. Currently there are 18 analysts that rate Starbucks a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Starbucks has been 9.4 million shares per day over the past 30 days. Starbucks has a market cap of $85.3 billion and is part of the services sector and leisure industry. The stock has a beta of 0.83 and a short float of 0.6% with 0.70 days to cover. Shares are down 1.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Starbucks as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 11.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, SBUX's share price has jumped by 45.21%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • STARBUCKS CORP's earnings per share declined by 29.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STARBUCKS CORP increased its bottom line by earning $1.82 versus $1.36 in the prior year. This year, the market expects an improvement in earnings ($1.89 versus $1.82).
  • The gross profit margin for STARBUCKS CORP is currently lower than what is desirable, coming in at 28.56%. Regardless of SBUX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.79% trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Hotels, Restaurants & Leisure industry average. The net income has significantly decreased by 30.1% when compared to the same quarter one year ago, falling from $983.40 million to $687.60 million.

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