Apply Pay Could Be a Big Catalyst for SBUX Stock
Shares of Starbucks Corporation (NASDAQ:SBUX) surged to an all-time high earlier this week after the company reported strong sales in the fourth-quarter. Starbucks stock started out at a measly $0.34 in 1992. It is now worth over $62.00, gaining some 52% of it in a caffeine rush over the course of the last year alone. By comparison, the S&P 500 rose by one percent.
Rather than caffeine, Starbucks stock will be sustained by a profit of $652.5 million, or $0.43 per share, for the quarter that ended on September 27th, fully meeting expectations of analysts polled by FactSet. The expectations were high because quarterly revenue gained nearly 18%, reaching $4.91 billion, slightly higher than the $4.9 billion forecast by analysts. (Source: “Starbucks meets 4Q expectations as traffic, spending in stores improves,” Daily Reporter, Oct.29, 2015.)
This Could Be a Catalyst for SBUX Stock
Starbucks expects to earn between $1.87 per share to $1.89 per share for the year, pushing the stocks to new records by the next quarter. This is thanks to a further sales push, driven by new markets. Among them is Italy, where it should make its debut imminently, and France, where it is expanding.
Starbucks should see further growth by making it easier for customers to relinquish the funds they need to satisfy their Frappuccino cravings. Jennifer Bailey, head of Apple Inc.‘s (NASDAQ:AAPL) Apple Pay, confirmed the extension of the program to thousands of shops. (Source: “Early movers: AA, ASNA, SEAS, LLY, WFC, TSLA, AAPL & more,” CNBC, Oct. 9, 2015.)
American Starbucks customers are already able to use Apple Pay at Starbucks to recharge their account. They will soon be able to pay directly in stores using the system. Bailey said that the chain would test the program in select U.S. stores by the end of 2015 and then start adopting it in about 7,500 Starbucks locations by early 2016. This should benefit both companies reciprocally. Apple Pay will gain a faster adoption rate for its new system, while Starbucks will benefit from customers who are already on the system.
Apple pay is only available to U.K. and U.S. residents for the time being, but Apple plans to launch the system in as many countries as possible in the future. The only question is the pace at which it will do this.
Apart from adopting new payment systems to boost sales, Starbucks is constantly changing its model, keeping pace with cultural trends. (Source: “Starbucks’ new ‘coffee theatre’ makes play for London market,” The Guardian, Oct. 20, 2015.) The Italian store opening is a crowning achievement for the company, which never felt it would be able to compete with the product offered by Italian bars. It has a chance of succeeding because Starbucks offers a different coffee experience in Italy. And that’s exactly what the market demands.
Starbucks stock will also gain from the coffee chain’s ability to adapt and make evolving cultural changes as its own. For instance, Starbucks has opened a new facility in Seattle, adapting wine culture to coffee through a “tasting” shop. This is the first pillar of Starbucks’s evolution, developing an upmarket “Starbucks Reserve Roastery” in Seattle. In doing so, Starbuck’s is setting new standards for coffee gourmands in Seattle. This is the first of 100 such luxury stores to be opened worldwide.
Here’s the Bottom Line on SBUX Stock
Starbucks stock itself should feel the gains as the chain finds more ways of winning over customers. It could even win over self-declared coffee snobs, who can now sample special coffee blends from limited production batches to rare producers. Strategically, Starbucks has also found a way to differentiate itself from its image as being the “McDonald’s of coffee.” It is the best way to help grow the coffee market in the U.S., which appears to have hit a stagnation point. In other words, Starbucks is hitting the two major notes to grow its business: international expansion and brand diversification into the premium coffee market.