Beware the Sugar Rush Investors Have for This Stock

(This stock is all pumpkin, no spice.) Published By Money & Markets, LLC. August 16, 2024 Published By Money & Markets, LLC. August 16, 2024 [Turn Your Images On] [Turn Your Images On] From The Desk of Chad Stone Managing Editor, [Money & Markets Daily]( Beware the Sugar Rush Investors Have for This Stock Money & Markets Daily, Nothing screams “discretionary spending” quite like a $6 cup of coffee. In keeping with Matt Clark's theme of [consumer stocks]( in yesterday's Money & Markets Daily, I wanted to dig a little deeper into one of America’s favorite little indulgences… I'm talking about Starbucks Corp. (Nasdaq: SBUX), of course. Starbucks is like a candy store for grown-ups. It satisfies your sweet tooth cravings with caramel, chocolate and whipped cream while simultaneously delivering a caffeine fix to keep you going. The chain has always been one of my guilty pleasures. If I need a boost while out and about, it's hard to beat a shaken oat milk espresso or cold foam cold brew. But as I get older (and as prices keep creeping up), I find it harder to justify the occasional splurge. Going off Starbucks' recent earnings reports, I’m not the only one brewing more of my coffee at home. Following a recent run of disappointing sales and with its stock in the dregs of the market, Starbucks is appointing a new CEO. So let's see how SBUX looks now through the lens of Green Zone Power Ratings. A Much-Needed Caffeine Boost for SBUX On Tuesday, Starbucks announced that Brian Niccol will replace former chief Laxman Narasimhan. The latter failed to turn the business around in his brief 17-month stint. Niccol knows a thing or two about fast food. He helped turn Taco Bell's fortunes around before taking charge of Chipotle in 2018, growing it into the burrito-rolling empire that it is today. Investors are bullish on the move. SBUX shares soared 23% higher following Tuesday's news.    But our Green Zone Power Ratings system says SBUX may need another pick-me-up before it really gets going… [Turn Your Images On] Starbucks stock rates a "High-Risk" 19 out of 100, which means it's set to underperform the broader market over the next 12 months. You may be wondering … how the heck a stock that just jumped 23% in a day still rates so poorly. Adam O'Dell designed this system to consider 80+ metrics spanning multiple time frames. While significant events like a CEO change can trigger massive daily moves like we saw earlier this week, this system is more interested in the bigger picture. And there's one big red flag when we do that. --------------------------------------------------------------- [Turn Your Images On]( [“Titan of Tech” Bets Big on Tiny AI Company]( He’s made as much as 3,250,000% in just three years on companies like Facebook, Airbnb, and PayPal…  But our research shows his latest investment could be his most successful venture yet.  [See how you can invest alongside him]( (with a starting stake of just $25).  But you’ll want to do it between now and August 5. --------------------------------------------------------------- SBUX's Volatility Is Like a Quad Shot of Espresso I want to focus on SBUX's Volatility rating of 33. Stocks that rate poorly on this factor have more volatility than the broader market. After doing a little digging, I enlisted Matt to help me figure out what's going on with SBUX's price swings. He dropped a bomb of a chart in our group chat: [Turn Your Images On] This chart shows the correlation between SBUX's stock price and company announcements over the last two years. Any gold "E" on the chart marks an earnings call, red "M"s are management announcements, and gray "2"s demark days where both occurred. The secondary chart along the bottom is the stock's average true range (ATR). Here’s Matt with a breakdown: The ATR of a stock measures volatility by doing just what it says… averaging true ranges over a specific period. When the range moves higher, it indicates a rise in volatility. What I see with SBUX is a 14-day ATR that moves up and down frequently over the last two years, noting a high degree of volatility. And you see more volatility occurring alongside major company events (earnings and leadership changes, specifically). If you buy this stock, know that there's a trend here. I work with some incredible people. Thank you again, Matt! As Matt said above, this is a very reactionary stock. When news is good, investors will give the stock a jolt akin to the strongest espresso shot around. But when news is bad, it's like the caffeine crash that hits me every day right around 2 p.m. Just look at the 15% loss that occurred back in April after the company reported lackluster earnings. That high volatility, paired with a 6 rating on Momentum in Green Zone Power Ratings (the stock is flat year to date), tells me to look elsewhere for now. Niccol may revive America's coffee king like he has with other American fast food giants, but I'm happy to wait this one out. Until next time, Chad Stone Managing Editor, [Money & Markets Daily]( --------------------------------------------------------------- Check Out More From Money & Markets Daily: - [WHAT OUR RATINGS SAY ABOUT CONSUMERS NOW]( - [FROM GARBAGE BAG PEDDLER TO A TITAN OF TECH]( - [2024’S “CLOSED AI” TAKEOVER BEGINS NOW]( --------------------------------------------------------------- [Turn Your Images On]( Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. 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Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2024 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. 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