Starbucks (SBUX, Financial), the coffee giant, has had a fantastic year during the holiday season of last year. The sales and revenues reported during this period were the best for Starbucks in its 43 years of operation. With a bevy of new products in its kitty and millions of satisfied customers under its fold, Starbucks shares have been continuously increasing. Wall Street analysts are predicting that the share prices might go up to the $105 mark per share.
Will Starbucks stocks go up to $100 per share this year? Does the company have enough potential in it to touch this magical mark? Read further to understand about this:
Successful mobile strategy
Starbucks literally enjoys a monopoly over other beverage companies in the world as it was evident from the financials reported for the first quarter of 2015. Earnings per share, at $0.80 currently, had grown by 16% and quarterly revenues, at $4.8 billion, had grown by 13% from the same period last year. If Starbucks continues in this pace of growth in the coming years, the EPS is expected to go up to $3.13 per share in 2015, thereby the company completely outperforming the average S&P 500 Index.
One unique model that Starbucks adopts to get an edge over its competitors is its mobile strategy. The mobile app of Starbucks is used by close to 13 million customers per day in the USA. Close to 7 million transactions are generated at the stores of Starbucks every week through this mobile app. No other company (in the beverage or any other sector) has used the mobile strategy as effectively as Starbucks. Around 16% of the first quarter’s sales reported by Starbucks were contributed by mobile transactions.
Starbucks has not just stopped there. In a bid to cash in on this success and to improvise its business model, a new initiative known as “Mobile Order and Pay” was launched by the company recently. As a pilot project, this service was first rolled out for 150 stores of Starbucks located at Portland. Through this facility, customers can easily place their order and pay for the same from their mobile and then pick up their orders from the stores. The basic advantage for the customer was that he could save an enormous amount of time and effort standing in queues. This service was a blockbuster hit, due to which Starbucks is planning to launch this service in another 600 Pacific Northwest stores in the near future. This service will propel phenomenal mobile transactions and earnings for Starbucks this year – all of which have the capacity to shoot up share prices.
Emerging markets-oriented approach
Of the emerging markets, China is the one with the most potential. Starbucks has understood that the China and Asia Pacific markets can generate huge amounts of growth; hence it has set up many stores there. This year, close to 10,000 stores will be opened in these areas as this is one of those areas where Starbucks has seen more than 20% increase in revenues for 17 quarters on the trot. The chart below shows the segment-wise growth of Starbucks for the first quarters of 2014 and 2015. From this, it is evident that the pace of growth in the China & APAC markets has been significant.
Conclusion
Starbucks is currently involved in a big-level transformation that is paying off with great results. It has identified the areas with high potential and is implementing all kinds of strategies to extract the maximum benefit out of them. By making the right moves at the right times and by focussing on value-added projects, Starbucks is on the path of great progress, from where it is almost difficult to turn back. Hence share prices of the company look like they will meet or even exceed expectations of the $105 per share this year.
