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Starbucks News is Good for April Options

Challenges abound but coffee giant still brewing profits


Traders were atwitter last week over Starbucks (NASDAQ: SBUX) plans to unveil “in the near future” a new single-serve coffee product.

Starbucks recently won a suit ending its dozen-year partnership with Kraft (NYSE: KFT).  Rumors are swirling that Green Mountain Coffee Roasters (NASDAQ: GMCR) could be the beneficiary. Option trading investors already know it but never forget … take all rumors with a grain of salt.

Although Starbucks recently announced record seasonal profits, it also issued conservative forward guidance of just $1.43-$1.47 per share. Rising commodity prices may prove to be an obstacle, as coffee — Starbucks’ lifeblood — is no exception, with coffee prices at a 13-year high.

Sure, SBUX is up nearly 50% in the past year alone, and it plans to open 500 new stores this year in markets like China along with entering the Indian market.

Still, I like the SBUX April 33 Calls, which are going for about $1.60 today.

Note that Starbucks CEO Howard Schulz recently joined the board of Groupon, the super-successful online deal house. It wouldn’t be surprising if Groupon were to offer deals on Starbucks gift cards and merchandise (say, a brand-new single-cup coffee brewer).

In the nearer term, however, consumers aren’t going to give up their Starbucks runs. It’s still “the” meeting place for students and small-business owners. And with healthier menu items than fast-food joints, it’s a one-stop shop for consumers on the go.

Article printed from InvestorPlace Media,

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