SBUX Stock: The Many Reasons Starbucks Corporation Could Soar in 2016

Bullish on SBUX StockBullish on SBUX Stock

Starbucks Corporation (NASDAQ:SBUX) is growing in concept, number of stores, and number of countries, so Starbucks stock could reach an all-time record-high in 2016.

Since last February, Starbucks has steadily climbed. Starbucks stock has gained about eight percent in the past three months, confirming a decidedly bullish trend. There is little to stop Starbucks from setting an all-time record-high. Analysts have suggested as much.

Having considered such indicators as same-store sales, Piper Jaffray considers Starbucks stock a top pick and performer in 2016. (Source: “Piper Jaffray remains convinced of strong performance by SBUX as the stock maintains its 2016 top pick spot,” The Country Caller, March 28, 2016.)

Starbucks stock will rise not only because the brand is growing, but also because the company is continuously evolving. Starbucks’ new concept of the Roastery & Tasting Room is a strategy to build its customer base in the bigger cities worldwide and to compete with specialized cafes. With this concept, the coffee chain is hoping to improve customer experience by allowing consumers to learn more about the roasting experience and taste a variety of coffees in the hopes of fostering a greater appreciation for the brand and its roasting process. The formula of this concept includes a wide space, like the 20,000-square-foot location that will open in New York City’s Meatpacking District in early 2018. (Source: “Starbucks Plans Massive New ‘Roastery’ for New York City,” NBC, April 6, 2016.)

The new concept will allow Starbucks to grow its customer base and revenue by attracting people who would not have considered visiting a Starbucks store but like the appeal of the full experience of the Roastery & Tasting Room.

Other recent innovations at Starbucks restaurants to boost customer appeal include alcohol and bistro-style menus and worldwide expansion, including China and Africa . The coffee company opened 528 new stores in 2015 and plans to make China its biggest market by 2019. (Source: “What war on Christmas? Starbucks holiday sales lead to record revenue,” The Guardian, January 21, 2016.) No other coffee roaster and distributor specialist even comes close to Starbucks’ level of market presence.

Starbucks is also breaking ground in Africa. If that seems odd, the major news outlets have done a poor job of explaining that there is an emerging African middle class. It is growing quickly in such countries as Kenya, Nigeria, and Ethiopia, the very place where the first coffee beans originated—not to mention South Africa and Namibia. The new middle class consumers in Africa offer a new market for multinational goods; Starbucks can tap into this demand.

The first Starbucks cafe will open in April in Johannesburg through a partnership with local South African distributor Taste Holdings. Two additional cafes will open in late April. The cafes will be located in shopping malls in upscale neighborhoods of the South African business capital. (Source: “Taste brews big goals,” IOL, March 6, 2016.)

South Asia is another new frontier for Starbucks, which wants to establish a strong presence in the emerging Asian metropolises. With this approach, the company promises long-term growth of up to 30% in Asia. (Source: “Starbucks sets sights on Asian expansion,” WARC, January 14, 2016.)

In 2015, Starbucks was all about innovation and it is not surprising that the stock gained almost 50%. The company continues to evolve and alter its model, starting from a small coffee roaster in Seattle to offering wine, beer, and tapas-style appetizers with bacon and cheese in select stores. These changes will no doubt be made in more stores moving forward.

The stock’s growth, meanwhile, is assured by the company’s plans to intensify the brand’s presence in its customers’ everyday lives. The 2015 financial year shows that Starbucks is on the right track, with a rise in shares of 46.7% recorded. The introduction of additional food choices has contributed to the stock’s success.

Starbucks has long been far more than a seller of coffee beverages. The chain has already started to offer snacks and small meals and this trend should continue. This strategy of cross-selling has already become an integral part of each store, which can help promote greater loyalty from its existing regular visitors while also attracting a new type of customer altogether.

This can only help the company and Starbucks stock grow.