SBUX Stock: 3 Reasons to Be Bullish on Starbucks Corporation

The Upside of STARBUCKS(Nasdaq:SBUX) Stock

by Gaurav S. Iyer, IFC

Starbucks Corporation (NASDAQ:SBUX) is still one of the most ubiquitous brands in the world. It has defined coffee culture more than any of its competitors and that lends SBUX stock a true edge over competitors.

The brand is synonymous with much more than quality coffee. In fact, the actual taste of Starbucks coffee is the thing that’s least tied to their success as a company. As a brand, Starbucks is associated with culture, conversation, and class.

Have you ever noticed that Starbucks tables are circular and not square? That’s not by luck or chance—it’s because no one is sitting alone when they’re at a circular table. By choosing that particular design, they’re able to create an inviting atmosphere.

These small strokes of genius have kept Starbucks ahead of the pack. They were also among the first coffee shops to add Wi-Fi to their stores.

All these little improvements came from the same driving force behind the company: that Starbucks is more than just a place to get coffee. It’s a place for people to sit and catch up with friends. It’s a place where you can study, read, or just sit and listen to music. It’s a modern-day worldwide piazza.

That’s the real strength of Starbucks, so they do whatever they need to keep up that atmosphere.

But that’s hard to measure, so let’s look at three key numbers that also have me bullish on SBUX stock. Judging by these metrics, Starbucks stock could explode on the chart.

1. There were 528 new store openings in Q1.

Starbucks is making a huge push into international markets after reaching saturation in North America. More than half of all new store openings came from the China/Asia Pacific region, showing that the company is definitely gaining overseas market share. (Source: “Starbucks Delivers Record Q1 Revenues and EPS,” Starbucks Corporation Investor Relations, January 21, 2016.)

2. Loyalty membership went up by 23%.

The loyalty program has been one of the most attractive features of SBUX stock. Starbucks has been trying to increase its same-store sales and a loyalty program is the best way to do that. The program now has 11 million active members in the U.S., who have loaded a total of $1.9 billion onto their Starbucks cards. Also, the company recently changed how they calculate loyalty points in favor of higher-spending customers, which could give a boost to SBUX stock’s loyalty program numbers. (Source: Ibid.)

3. Operating Margins increased by 60 basis points.

Let me translate that into plain English: An operating margin is how much money the firm makes on each sale. It’s good when the margin goes up and bad when it goes down. The fact that it increased to a Q1 record of 19.7% shows that Starbucks is squeezing more profits out of each dollar of revenue. (Source: Ibid.)

When these three factors are viewed together, it’s clear to me that SBUX stock could surge.