Starbucks (SBUX) Weekly Chart Analysis: Bullish Flag Formation Emerges Amid Mixed Earnings Outlook for 2025
TLDR
Technical analysis reveals a potential bullish flag formation on SBUX's weekly chart, suggesting a possible 15% upside. Entry recommended at $99.73 with a target of $115.00 and stop-loss at $95.00 (3.5:1 reward-to-risk ratio). However, fundamental data shows concerning earnings contraction forecasts for 2025, creating a mixed investment thesis that favors shorter-term technical trades over long-term positions.
Technical Analysis
Chart Specifications
Weekly timeframe chart as of March 28, 2024, utilizing SMA 200, SMA 50, SMA 150, SMA 20, and volume indicators.
Current Market Structure
SBUX appears to be transitioning from a bearish to potentially bullish trend, with price recovering from $88.00 to current levels around $98.00. The stock is currently trading at a critical juncture:
- Key Support Levels: $95.00 (recent low), $88.00 (significant 2023 low)
- Key Resistance Levels: $105.00 (recent high), $115.00 (psychological/historical resistance)
- Moving Average Positioning:
- Price is hovering just above the SMA 200 ($97.00), which provides dynamic support
- Currently testing the SMA 150 ($98.00)
- SMA 50 ($99.00) acting as immediate overhead resistance
- SMA 20 ($98.50) providing short-term support
Chart Pattern Analysis
A bullish flag pattern is developing on the weekly timeframe, characterized by a strong upward move followed by a consolidation phase. This pattern typically signals continuation of the prior uptrend once resolved. A notable bullish engulfing candlestick pattern at the recent low further supports the reversal thesis.
Volume Analysis
Volume significantly increased at the $88.00 low, indicating strong accumulation and buying interest. While volume has since decreased, it remains above average, suggesting continued institutional participation in the stock.
Fundamental Analysis
Financial Health Assessment
Starbucks maintains a relatively strong balance sheet with $3.96 billion in cash ($3.48 per share), though this is offset by $25.9 billion in total debt. Liquidity metrics show some potential concerns:
- Quick ratio: 0.535
- Current ratio: 0.749
Both ratios being below 1.0 indicate potential short-term liquidity challenges that warrant monitoring.
Growth Trajectory
The fundamental outlook presents significant concerns:
- Revenue Growth: Modest revenue growth projections of 3.95% for Q1 2025, 4.86% for Q2 2025, and 3.49% for FY2025
- Earnings Outlook: Troubling EPS contraction forecasts:
- Q1 2025: -25.76% (EPS estimate $0.50 vs. $0.68 year-ago)
- Q2 2025: -6.52% (EPS estimate $0.87 vs. $0.93 year-ago)
- FY2025: -11.07% (EPS estimate $2.94 vs. $3.31 year-ago)
The earnings trend shows consistent downward revisions across all time periods, with analysts lowering estimates over the past 90 days.
Analyst Sentiment
Analyst consensus remains cautiously optimistic:
- Mean recommendation: 2.37 (Buy)
- Target price range: $76 (low) to $125 (high)
- Mean target price: $107.51 (10% upside from current levels)
- Median target price: $112.50 (15% upside)
However, recent EPS revisions have been predominantly negative, with more analysts lowering than raising estimates.
Trade Scenarios
Bullish Case
Entry Strategy: Buy at current price ($99.73) or on a pullback to $97.00 (SMA 200) Target: $115.00 (based on flag pattern measured move) Stop-Loss: $95.00 (below recent support) Risk-Reward Ratio: 1:3.5 Timeframe: 3-6 months Catalyst: Successful breakout above $105.00 resistance with increasing volume
Bearish Case
Entry Strategy: Short on rejection at $105.00 resistance Target: $88.00 (retest of significant low) Stop-Loss: $107.00 (above resistance) Risk-Reward Ratio: 1:8.5 Timeframe: 2-4 months Catalyst: Breakdown below $95.00 support with increasing volume
Risk Factors
Technical Warning Signals
- Failure to break above the SMA 50 at $99.00 could signal continued resistance
- Declining volume on upward price movements would indicate weak buying pressure
- A close below $95.00 would invalidate the bullish flag pattern
- Multiple moving averages clustered around current price ($97-$99) could create congestion
Fundamental Concerns
- Consistent downward earnings revisions across all timeframes
- Projected earnings contraction of 11.07% for FY2025
- Below-average liquidity ratios (quick ratio: 0.535, current ratio: 0.749)
- High debt load ($25.9 billion) relative to cash position ($3.96 billion)
- Recent earnings misses in two of the last four quarters, including a significant 10.6% miss in Q4 2023
Conclusion
Starbucks presents a conflicting investment case where technical signals suggest a potential short-to-medium term upside opportunity while fundamental data raises concerns about longer-term performance.
The technical setup shows a promising bullish flag pattern with a favorable risk-reward ratio for a trade targeting $115.00. The stock is finding support at key moving averages, and volume patterns support a potential reversal.
However, the fundamental outlook is considerably more challenging, with projected earnings contraction through 2025, consistent downward estimate revisions, and liquidity metrics that warrant caution. The company's high debt load further adds to the fundamental risk profile.
Recommended Positioning Strategy
- Short-term traders can consider the bullish technical setup with tight risk management at $95.00
- Medium-term investors should remain cautious and consider partial profit-taking if the stock approaches the $105-$115 resistance zone
- Long-term investors may want to wait for evidence of earnings stabilization before establishing or adding to positions
The divergence between technical and fundamental signals suggests that SBUX may be better suited for tactical trading rather than long-term investment until earnings projections improve.
Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. The views expressed are based on technical and fundamental data available as of March 28, 2024. All investments involve risk, and past performance is not indicative of future results. Readers should conduct their own research and consult with a financial advisor before making investment decisions. This article was written with the help of AI models