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Triage Trade: Starbucks

Tuesday, 8 Apr 2008 | 6:32 PM ET

Sometimes good companies get sick. Arrogant CEO’s, value destroying takeovers or obsolete products leave many holding on for dear life. Some cannot be resuscitated but for others there is hope.

And that's where Fast Money comes in. We call these type of companies “triage trades” because we believe the right changes in strategy and management can bring fallen corporate angels back to life again. Witness the Steve Jobs iPod revolution or Amazon’s retail resurrection.

On the operating table tonight, we look at Starbucks.

The stock soared over 5000% from its IPO as the caffeine pusher introduced high-end coffee to the nation. But after opening more than 6 new stores per day Starbucks gorged on its own success. Ill-fated moves like breakfast sandwiches have put the java giant in the ER. What’s the treatment to get this stock out of triage and into a winning trade?

Jeff Macke has a 4 step prescription for fixing Starbucks.

- Amputate half the menu
- Unclutter the stores and cut extensions
- Talk like hippies, act like capitalists
- Ignore the competition

What’s the bottom line?

I’m bullish on Starbucks long-term, says Macke.

I am too, adds Guy Adami with a $16.75 stop.

I like the valuations, adds Karen Finerman.

I disagree, counters Pete Najarian. They’re not going to listen to Macke. Instead, I’d look at Burger King or McDonald’s .

Triage Trade: Starbucks
Discussing what it will take to fix slumping Starbucks stock, with the Fast Money crew.


We want to know what you think. Can Howard Schultz (and Jeff Macke) revive Starbucks? Tell us now. Answer the Charles Schwab Question of the Day.



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Trader disclosure: On Apr .8, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (YHOO), (MSFT), (INTC); Najarian Owns (AAPL), (MSFT), (YHOO), (XLF), (CSCO), (BIIB), (CHK), (BKC), (AMR), (DAL); Najarian Owns (AA) Calls, (BA) Calls, (BSC) Calls, (COP) Calls; Najarian Owns (LEH) Puts, (MER) Puts, (OIH) Puts; Finerman Owns (GS); Finerman's Firm And Finerman Own (FLS); Finerman's Firm Owns (MSFT), (PZN), (SUN), (TSO), (VLO), (WMT), (YHOO), (KALU), (SBUX); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Finerman's Firm Owns (FNM) Calls; Finerman Owns (AMV) Warrants

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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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