A Bold Coffee Play

Published on
July 6th, 2018
9 minutes

A Bold Coffee Play

Trade Ideas ·
Featuring Chad Morganlander

Published on: July 6th, 2018 • Duration: 9 minutes

Chad Morganlander of Washington Crossing Advisors is bullish on Starbucks, one of the most beaten-down names in the Dow. Despite store closures and a departing CFO, Chad sees upward momentum for Starbucks due to growth potential in global markets. He lays out his thesis in this interview with Brian Price. Filmed on July 2, 2018.


  • CM
    C M.
    10 July 2018 @ 02:00
    In the Nashville area, SBUX is busy all the time. While independent coffee shops do well here, you can see 10 cars waiting in the drive through lane at Starbucks. I also visit one in a rural town, Manchester, off of I-24. Very busy in the afternoon. In talking with the staff, find out their business is strong throughout the day due to Interstate traffic. Believe this is an opportunity for expansion, particularly in the South, where good coffee places can be few and far between. And while coffee brands can be personal taste, there are alot of coffee drinkers that find Starbucks (or any premium coffee) much better that Folgers or McDonalds. On China, their government stated that they would not penalize US companies investing in their countries. Have a feeling due to their political stance that they will need see a lot of blow back from the Chinese government. Big question is the next recession, as they will certainly see a downturn in their business.
    • CM
      C M.
      10 July 2018 @ 02:02
      Without an edit function, apoligizes for some mis-typed words. Need to edit before replying.
    • CM
      C M.
      10 July 2018 @ 02:12
      And to add, SBUX has one of the largest mobile payment systems in the USA. Larger than Apple or Google. An asset that doesn't show up on the balance sheet, but something to consider. 55 million people have used a mobile app to pay in-store in the US. 23 million have done so at Starbucks in the last 6 months.
  • VM
    Vincent M.
    8 July 2018 @ 02:16
    I buy Black Rifle coffee ... superior product at a lower price. A recession will hit them hard as over priced products are the first to go... buy MCD... on their continued weakness.
    • CM
      C M.
      10 July 2018 @ 02:06
      Just checked the Black Rifle coffee website, $13.99 to $15.99 per pound looks to be in the same price range as Starbucks and other premium coffees.
  • SH
    Steve H.
    9 July 2018 @ 16:18
    Mr. Morganlander's outlook seems far too JOvial.
  • DM
    Dan M.
    7 July 2018 @ 00:20
    5% target in 3 months with a weak chart using a fundamental stop loss which strongly implies risk >> reward -- this looks like a completely nonsensical trade which no trader should even consider. What am I missing?
    • ns
      niall s.
      8 July 2018 @ 21:43
      You missed nothing , I like the RV trade ideas but only the ones that set up well technically on a short term basis , this one should be called an investment idea . More ideas like this one will hurt the "trade Ideas" brand IMO , which is a pity because it was going places.
  • DS
    David S.
    8 July 2018 @ 03:59
    I added to my watch list, to see how SBUX plays its cards with all the problems. With a 59% gross margin, 39% return on invested capital and gaining worldwide exposure it is worth watching. I enjoy their espresso, no sugar, in a ceramic cup - but that is not a reason to buy. DLS
  • SS
    Sam S.
    7 July 2018 @ 13:10
    I know someone who "was" a manager at SBUX -- what a mess. Their coffee is crap and needs lots of flavorings to kick it up a notch. I can buy mild roast Folgers at Costco $8 for 3 pounds of ground coffee. That's a lot of coffee. Buying coffee at SBUX is like owning a pool----walk buy and throw in your wallet. SBUX opens and closes stores like crazy. Betting on China-----not for coffee. The Chinese will figure a better cheaper way to make good coffee at a the right price. Their pricing, their rewards, store experience, battle for the bathrooms----not worth it. With that mindset, why buy pre-packaged in a store. I'm just saying.
  • NI
    Nate I.
    7 July 2018 @ 03:50
    I'm a formerly loyal Starbucks customer, but the price hikes and changes to the rewards program that slapped their long-term customers in the face left a very bad taste in my mouth. I bought a thermos and an expresso machine. No more SBUX and better coffee for less money. Ok, ok, I'm just one person I know... but in the bigger picture, the economic data is flashing red that consumers are broke and credit expansion just can't go much further. Against that backdrop, I think the $4 cup of coffee is history. There will be a time to buy SBUX, but I think it will be when times get better. Of course if the stock gets beaten down enough, then sure I would buy it.
  • SS
    S S.
    6 July 2018 @ 09:40
    Starbucks is/will face a lot of competition from Costa Coffee in China. Market saturated in USA. Coffee commodity prices are also expected to increase, which is negative for Starbucks as they won't be able to pass on all the costs to consumers. Not a lucrative trade in my opinion.
    • BP
      Brian P. | Real Vision
      6 July 2018 @ 11:47
      Interesting counterpoints. Thanks for watching, Kulbir!
    • JD
      Joe D.
      6 July 2018 @ 22:07
      Costa very visible in South Korea also...
  • FH
    Franz-Xaver H.
    6 July 2018 @ 21:29
    Talking about longer term prospects for a trade? The chart looks bad and the fundamentals of the company are getting weaker IMO. CFO leaving must mean nothing but has to be factored in. I am hearing a company speaker, not a trader.
  • PG
    Pablo G.
    6 July 2018 @ 13:51
    Not sure I would try to catch the falling knife. Why not wait for some indication of a bounce?
  • BD
    Bruce D.
    6 July 2018 @ 12:28
    Chart says give it time, wait for $40,then buy. Headwinds are large right now......