'Buy Starbucks' into earnings, says top technical analyst

Starbucks shares are heating up.

The coffee chain has rallied more than 13 percent in the past three months, shaking off a broad decline on the S&P 500, to get back within range of record highs.

Ahead of its earnings report after the bell Thursday, one top technician says it looks like a buy.

"The trend looks pretty good," Piper Jaffray chief market technician Craig Johnson said Tuesday on CNBC's "Trading Nation." "The stock broke out of a huge multiyear consolidation, pulled back, found support around $64, $65, now at $66, it looks like it's starting a new leg higher."

Starbucks last hit a record high in November. It is a 3 percent rally from returning to those levels.

"Typically from a technical perspective, this should be a decent entry point to buy the stock," added Johnson. "Yes, we've got earnings coming this week, but I'd be buying the stock into that print."

The company's long-term strategy is also paying off, says Erin Gibbs, portfolio manager at S&P Global.

"They definitely made some missteps over the past few years with the purchase of Teavana, some of their in-app ordering, but they've corrected those and they've really refocused on new products, and their announcement of their expanded delivery with Uber Eats is creating a lot of buzz," Gibbs said on "Trading Nation" on Tuesday.

Starbucks on Tuesday expanded its partnership with Uber Eats to offer delivery in six new U.S. cities, including New York and Los Angeles. The company already has delivery services internationally, including in China, Japan and India.

"We're still expecting about 10 percent earnings growth for next year, which is well above the S&P 500, so they certainly deserve a higher valuation," said Gibbs. "We're looking at good organic revenue growth, really some interesting partnerships going forward, and we like this stock. We have it in a couple of our portfolios."

Starbucks is expected to post 9.5 percent revenue growth in its fiscal 2019 year ending September, according to estimates compiled by FactSet. Analysts anticipate earnings growth to accelerate to 13 percent in fiscal 2020.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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