Starbucks recovery plan is working. Here's how Mike Khouw says to trade the coffee giant — SkimNews
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- Starbucks shares are up 12% year-to-date but have been "dead money" over the past five years, trading at roughly 30 times forward adjusted earnings on a consensus FY estimate of ~$3.12.
- CEO Brian Niccol is executing a turnaround to reverse the rushed mobile-ordering era that overwhelmed baristas, dirtied stores, and lengthened lines; Khouw says in-store execution is improving based on store visits.
- Starbucks trades at 17.6x forward estimated EBITDA versus an industry average of ~12x, a premium Khouw says is keeping a lid on the stock.
- Starbucks finalized a divestiture of 60% of its China retail operations in April, strengthening financial flexibility and potentially creating room for buybacks alongside its existing dividend commitment.
- Mike Khouw recommends selling a November $85 put and $105 call strangle for a $2.25 net credit, yielding 16% annualized if the stock stays near its current level.
- The strategy's defined-loss points: getting short at $107.25 (a 13% premium to current price) or long at $82.75 (12% lower), with options implied volatility having averaged well above realized volatility over the past two years.
Why it matters: For options sellers, the combination of Starbucks' elevated implied volatility (running above realized volatility for two straight years) and a rich 30x forward earnings multiple creates an attractive short-premium setup — but the trade carries defined exit points at $107.25 upside and $82.75 downside, a roughly 25% combined range that frames how much room the stock has before the position is at risk.
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