Starbucks Refutes Negative Consumer Sentiment Claims

Starbucks Refutes Negative Consumer Sentiment Claims
March 14, 2017

Global coffee and food retailer, Starbucks (NASDAQ: SBUX) lost about 4% last week to close at $54.48. There were two main reasons for the decline in the share price. Firstly, a market research firm named xAd reported that the US foot traffic declined to 11% in February, from 12% in January. Secondly, a survey from YouGov stated that the consumer perception of the coffee house chain took a hit, following the company’s announcement to hire up to 10,000 refugees, over a period of five years, from the countries where it conducts business. However, considering the clarification issued by the company, we anticipate a reversal in the stock.

Following the US President Trump’s executive order banning refugees from seven countries, the Chief Executive of Starbucks, Howard Schultz, stated that he would go ahead and hire several thousand refugees. The enraged supporters of Trump used social media to call for a boycott, and demanded Starbucks to hire army veterans. Following these developments, YouGov stated that the BrandIndex, which tracks consumer sentiment, fell to 4, from the prior Buzz score of 12. The scores, which can range from 100 to -100, are calculated by subtracting the negative feedback from the positive feedback.

YouGov spokesman also stated that the percentage of consumers who were willing to buy coffee from the Starbucks next time fell to 24%, from the prior 30%. Furthermore, according to YouGov, the rise in negative perception may affect the company’s revenue. Wall Street immediately took notice of the report and sent the stock downwards.

However, on Friday last week, Starbucks refuted the charges and shared a letter sent by the multinational marketing research firm Kantar Millward Brown. The firm, which is providing brand equity measurement service for Starbucks since 2013, stated that it has not seen any negative consumer perception of the brand since February 2017. Additionally, Kantar Millward Brown clarified that it did not see substantial impact on any of the key performance metrics related to Starbucks. The announcement made by the management is expected to provide a sigh of relief to the investors. We anticipate a reversal in the stock price on the basis of management’s announcement.

The stock chart indicates a doji formation near the major support level of 54.20. A doji candle usually results in a trend reversal. The possibility of a technical bounce back is also reflected by the RSI indicator which is near the oversold level of 20. So, we can expect the share price to rise back to the next resistance level of 56.

Starbucks - Technical Analysis - 14th March 2017

To trade the forecasted upswing, a trader can pick a high or above option which expires in a week. It would also be advantageous to the binary trader, if the contract is bought when the underlying stock trades near $54 in the equity market.


Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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