Starbucks' Momentum Remains In The US, Still Has Huge Opportunity With Mobile Order/Pay

Starbucks Corporation SBUX shares came under pressure after the company missed revenue expectations for F2Q and announced its 3Q earnings guidance short of forecasts. Goldman Sachs’ Karen Holthouse maintained a Buy rating for Starbucks, while raising the price target from $69 to $72. The analyst commented that there were “clear US comp drivers on the horizon.”

Starbucks’ shares declined by about 4 percent on concerns that 7 percent US comps and flat 2-year trend “signify the slowing of top-line momentum,” analyst Karen Holthouse said. She added, however, that Mobile Order and Pay [MOAP] would be among the opportunities driving US comps.

MOAP As A Significant Opportunity

“SBUX has focused on targeting MSR users for trial, with significant success on conversion, and integrating it into marketing for new rewards program; however, a broader push for awareness is slated for the summer,” Holthouse wrote.

While Starbucks rolled out the first phase with MSR, it plans to continue to target specific cohorts more quickly. An improved version of the current in app suggestions is expected to be launched by the end of the quarter. “Our sense was personalization became the priority given rewards changes,” the analyst commented.

Estimates Changed

Our EPS estimates for 2016, 2017 and 2018 have been raised from $1.88 to $1.89, from $2.18 to $2.19 and from $2.54 to $2.57, respectively, to reflect tweaks in the assumptions for comps, margins and currency impact.