Trendline could be the kiss of death to Starbucks stock
Starbucks released a very critical piece of information today. The economic slowdown in the US is affecting the premium coffee market and hard. Higher prices for coffee from a weakening dollar and slowing demand for a $4 cup of coffee has the luxury item in a headspin. Many Americans are finding that the daily latte proves too much for their pocketbook.
While the fundamentals are weak enough, the stock also slipped through a critical trendline in after hours trading. The same support that has held the price since 1998 was broken, this marks a huge disadvantage for the share price of Starbucks. The stock had bottomed on this line for a couple months, but negative news was enough to send it through the line. The stock lost nearly 11% of its value in after hours trading.
Analysts had high hopes for the coffee chain. A number of analysts pinned second quarter earnings of 21 cents per share. The actual, 15 cents per share was even lower than 2007 earnings of 19 cents per share. So while Starbucks did not meet the expected earnings for this year, it posted lower earnings than last year. Starbucks earnings are certainly in a decline, due almost entirely to a slowing economy.
California and Florida make up for 32 percent of its retail sales, areas that have been hit hardest by the real estate bubble. California is expected to have as many as 450,000 enter foreclosure this year.
The red mark on the chart represents the current price, the chart has not been updated since after hours trading began.
