Starbucks, coffee.
They used to call it the McDonalds of coffee but that analogy is unlikely to make it into the business model textbooks. Visionary genius Howard Schultz got Starbucks
He “retired” a few years ago and another CEO ran the company for awhile, then retired and Shultz took over the reins again but things had changed. The company found it challenging to pay workers more than they had been paying them and selling coffee and pastries en masse (what a great idea!) had became less profitable.
Not to mention the advent of competition, not just from similar types of franchise operations, but from unique neighborhood-only coffee shops for those who find the corporate environment distasteful.
Here is the daily price chart for Starbucks:
Starbucks daily price chart, 5 2 24.
The stock peaked on this chart in November 2023 at just above $106. Today, it’s trading for $74.40. From top to the present amounts to a 30% drop. Starbucks is unable to make back above the 50-day moving average or the 200-day moving average, both of which trend downward. I don’t see a spot on this chart where the 50 made it to above the 200.
The Starbucks weekly price chart looks like this:
Starbucks weekly price chart, 5 2 24.
It seems as if the price may be headed for the May 2022 low down there near the $67 level. That would be the next area of support where buyers showed up previously. Note that the 50/200-week crossover appears to be imminent, a troubling signal for longer-term shareholders. You can see that each successive price peak - from July 2021 to May 2023 to November 2023 — is lower than the previous peak.
The monthly price chart for Starbucks is here:
Starbucks monthly price chart, 5 2 24.
That red circle designates the gap down in price from the end of April to the beginning of May. It’s the only gap on this monthly chart and shows how much investor sentiment has changed for the coffee chain. Starbucks is definitely trading below the up trending 50-month moving average.
Just for a different perspective on how the stock is performing, here’s the point-and-figure price chart for Starbucks:
Starbucks point-and-figure price chart, 5 2 24.
As you can see from the description above the chart, that’s a “descending Triple Bottom Breakdown” on May 1st, 2024. Here’s how Stockcharts.com defines such a pattern: P&F Bearish Breakdowns [ChartSchool] (stockcharts.com) The price has declined to below the 2022 support levels of $80.
It’s hard to keep competing in markets where conditions eventually and inevitably change beyond the original conception. “Challenging” is a mild word for it.
