Starbucks: Buy or sell?

The stock looks to be in correction mode as institutional traders have lost interest. What's its future?

By Kim Peterson Jun 15, 2011 12:59PM
Starbucks (SBUX) went on an amazing run from August 2010 through the end of March, with shares rising more than 50%.

But we really haven't seen much from the stock in the past three months. Shares bounced between $35 and $37, and Wednesday they were slipping below $35.

So is it time to buy or sell? In the following video, we get arguments for both moves. Dan Fitzpatrick of TheStreet says the technicals show big institutions have lost interest in Starbucks, while Jim Cramer says the institutions will be back and the stock is worth buying.

Post continues below:
Let's start with Fitzpatrick's view. What we're starting to see is sideways trading on the stock with declining volume. That shows an absence of determined buyers, Cramer says. The biggest buyers are no longer determined to snap up shares.

Then, on April 29, Starbucks fell 2% on very high trading volume. That's a classic sign of institutional selling. Now Starbucks may just be falling on its own weight.

But Cramer continues to be a fan of the stock. He says Starbucks has a great social-media strategy -- its 23 million Facebook fans are the most of any company -- and is like a third home for many people.

The coffee chain is aggressively rolling out stores in Asia and is looking at expanding into other countries there, including India and Vietnam.

And Starbucks' new distribution relationship with Green Mountain Coffee Roasters (GMCR) could be a positive.

"I wouldn't be a seller. In fact, I'd be a buyer," Cramer says. "I believe this is a story that's working."

What do you guys think? Is picking up Starbucks shares a good idea at this point?

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