Event: The king of coffee shops is preparing for its investor conference with Wall Street analysts on Friday, Dec. 7. In advance of that meeting, Starbucks (SBUX) announced plans to open 3,000 new stores in the U.S. over the next five years. It also expects to renovate thousands of locations in an effort to improve sales. In the coming year, Starbucks plans to open 1,200 stores across the globe including China. Shares of Starbucks are down 2.5% in morning trading on Wednesday.
Analysis: The Starbucks investor meeting on Friday is a big event. The company holds these meetings infrequently – once every other year. Look for a treasure trove of information to be released at the meeting. The key to Starbucks is growth. Can the company continue to deliver 20% annual profit growth or more in coming years? I like Starbucks’ chances. I expect one of the biggest drivers of growth to be its single-serve coffee machine. Bed Bath & Beyond featured the machine on the cover of its holiday catalog. Sales are going to be huge and Starbucks is likely to say just how huge on Friday. Another interesting tidbit for the short term is the falling price of coffee. Bean prices have dipped some 30% and yet retail prices have not dropped. Profit margins in the near term are likely to be strong. Put it all together and I am very close to making the company one of my favorite picks for 2013. For now, traders should consider looking at SBUX Call options to play the investor meeting on Friday.
Action: Buy SBUX December in the money Call options prior to Friday’s investor meeting.
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