Starbucks Corporation (NASDAQ:SBUX) is due to report its third quarter results after market close on July 21. Analysts see the coffee chain reporting earnings of 49 cents per share on revenue of $5.33 billion — nearly a 10% increase from last year’s results.
Last quarter, the firm’s revenue disappointed, and this quarter some are expecting another miss as the company settles into a new loyalty scheme that rewards customers for dollars spent rather than the number of visits.
While earnings results may not live up to expectations, investors would be wise to look beyond the figures to see the firm’s impressive growth potential.
Three Things to Keep In Mind With SBUX Stock
Starbucks App
Perhaps the most compelling reason to buy and hold on to SBUX stock is the company’s mobile app. The fast food industry is adopting a much stronger digital presence with many firms offering an order online, collect-in-store option, and Starbucks is leading the way on this front.
Starbucks’ mobile app has some 12 million active users and 24% of the firm’s U.S. transactions took place through the app last year. First quarter data showed a 16% increase in new-users from the previous year. These are impressive figures for any relatively new app, let alone one in the food-service industry.
For this reason, data regarding the firm’s online presence is an important consideration for investors. The Starbucks mobile app has been a runaway success and not only does it give SBUX a way to analyze customer behavior and create better rewards programs, but it brings in a great deal of money.
The app makes it faster and easier for customers to spend by having customers pre-load their account with money. In the first quarter of this year, Starbucks card accounts had $1.2 billion loaded onto them — more than some banks hold for their customers.
Growth Potential
Another closely watched aspect of SBUX earnings will be the firm’s future growth plans. Starbucks has been expanding rapidly by opening new stores around the globe, and its latest push into Asia will be a key area of focus for investors. This year, Starbucks has set out to open nearly 2,000 new stores, with half of those being in Asia. China and Japan are key markets for Starbucks and so far, there has been minimal penetration, so the success of those store openings will be a good barometer for the firm’s future growth potential.
Changing With The Times
China isn’t the only place Starbucks intends to grow — SBUX has been working to remake its image in the U.S. in order to secure its place as one of the most popular brands in the country. Investors will be looking for SBUX to address the success of its new store formats and extended menus as well as laying out its North American expansion plans. If Starbucks is able to generate new interest in revamped locations, like its Reserve Roasteries, it opens the door to further growth in more mature markets.
Bottom Line on Starbucks Stock
There’s a chance that Starbucks’ shifting loyalty program will affect third-quarter results as it did in the second quarter, but the firm’s growth story should overshadow an earnings miss. The coffee chain has been working to change with the times and grow in new ways both in the U.S. and internationally. With SBUX stock trading down 5.05% on the year, now is a good time to buy.
As of this writing, Laura Hoy was long SBUX.
