The latest breakout in shares of Starbucks (NASDAQ:SBUX) is reaching a potential breaking point.
Having spent the second half of 2021 unable to recapture its July all-time highs, the coffee chain’s stock is up more than 6% in the past week amid subsiding fears around the coronavirus omicron variant.
MKM Partners upgraded Starbucks to buy from neutral on Tuesday, expressing high hopes for the company’s long-term profitability and productivity despite some short-term obstacles. MKM also raised its price target for the stock to $130 a share, nearly 12% above Tuesday’s closing levels.
Starbucks’ latest push higher "sort of sets up a technical development," after months of relative underperformance, said Todd Gordon, founder of Inside Edge Capital Management.
"If we can get through 118, it looks good," he said. "We might see a resumption of the uptrend."
But it’s going to take more than an improving technical picture for Gordon to buy into Starbucks.
"I’m worried about the fundamentals," he said, pointing to the company’s debt levels, its exposure to the strengthening rental market and the difference between its valuation and analysts’ growth expectations.
Potential unionization could also cause a near-term wrinkle in Starbucks’ growth plans, but MKM may have a point, Chantico Global founder and CEO Gina Sanchez said in the same interview.
SBUX shares declined 30 cents to open Wednesday at $115.96
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