Starbucks Corporation: Will SBUX Get Back to All-Time Highs This Year?

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Starbucks Corporation (SBUX) stock took a hit a few weeks ago when it reported earnings that disappointed investors. SBUX had been as high as $64 and then fell to $54 — not because of earnings, but during the early-year market correction. After that, Starbucks stock got back to $61 before earnings took it down.

Starbucks Stock: Will SBUX Get Back to All-Time Highs This Year?

So can SBUX stock make it back to $64 this year? It’s impossible to say, but in all likelihood it will, and if not this year, certainly next year. There are several reasons why.

Why Starbucks Stock Can Make It Back Up

One of these reasons is its global positioning. I was just in Europe — Berlin, Krakow, Vienna and Budapest — and there were only two ubiquitous American brands.

I mean, there were many American stores there, but the two truly ubiquitous ones were Yum! Brands, Inc. (YUM) and SBUX. While limited in its number of locations — Europeans only have so much tolerance for SBUX — the ones that were there were incredibly busy.

Another thing Starbucks has on its side is its business-to-business penetration. SBUX is not merely a consumer brand. Today it has multiple deals with big-name companies that expand its reach.

For example, Keurig Green Mountain markets Starbucks coffee through its K-cup packs. Sysco Corporation (SYY) has exclusive rights to distribute SBUX to non-contracted food service clients. Privately held U.S. Food Holdings is a food distributor that brings food products to restaurants, healthcare and hotels. Guess which coffee they serve?

These are all long-term contracts that will buttress Starbucks stock.

And the list of things SBUX stock has going for it longer-term doesn’t end there. You’d think that being able to order ahead and have your drink ready to go wouldn’t be a big deal, but in today’s go-go world, it is.

Starbucks stock will continue to benefit from Mobile Order and Pay, which already sees 8 million monthly transactions, up 30% from the previous quarter. This kind of service elevates SBUX above competitors yet again, because convenience is a huge boon for consumers. It’s also testing delivery of both food and drinks.

And the list goes on.

What Expansion and Existing Culture Do for SBUX

China’s growth may be slowing, but it is still growing. Starbucks sees as many as 10,000 stores in the China-Asia-Pacific region and $3 billion in regional revenues by 2019. The mere thought that an already dominant global brand still has that much territory left to conquer is going to be another driver for Starbucks stock. This doesn’t even speak to continued expansion in Europe.

And on the other side of the ocean, you’ve got a SBUX culture that’s already ingrained in every-day life. Americans are creatures of habit, and the cultural disruption that Starbucks created when it gave Americans a place to meet that was between home and work is now entrenched.

Establishing this basic concept was more than just establishing a beachhead — it was establishing an entire continent. With the meeting location now established, Starbucks could just keep adding more and more in-store products to leverage that physical presence it has in everyone’s life.

It is now serving plenty of breakfast options, allowing it to steal market share from McDonald’s Corporation (MCD) and others. It serves tea via the acquired Teavana brand. It’s playing with soda and it has had pastries for forever. The beauty is that it can experiment now with tons of things because if they work, SBUX can keep the new products. If not, they can get tossed out while the store and existing products remain.

There are just too many growth drivers to keep SBUX down for long. The company continues to grow earnings at 18% to 20%. It will roar through $64 again sometime, probably sooner rather than later.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. As of this writing, he did not hold a position in any of the aforementioned securities. He has 20 years’ experience in the stock market, and has written more than 1,200 articles on investing. He also is the Manager of the forthcoming Liberty Portfolio. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com. As of this writing, he was long SBUX.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/05/starbucks-stock-back-all-time-highs/.

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