How Much Upside Potential Still to be Expected from Starbucks (NASDAQ:SBUX)?


Starbucks corporation (NASDAQ:SBUX) is a well-known coffee house based in Washington. The company has shown a very positive growth in the comparable-store sales and its third quarter finance denoted the company’s consistent quarterly growth by 5% for the 18th consecutive time.

Not only this, but the trader is consistently increasing the number of locations. Almost 350 new stores opened in one quarter; this computes the total number of stores to be about 21000. It is expected that this number will increase by 1500 this year. Wal-Mart (NYSE:WMT), in comparison, has just 11000 stores.

Starbucks (NASDAQ:SBUX) tries its best to become a pioneer in the true sense of the word by innovating in every way possible, however the market stocks are unstable since last year and the stock prices unexpectedly low.

One of the most powerful competitor of Starbucks (NASDAQ:SBUX) is the brand Dunkin’ (NASDAQ:DNKN) but a considerable difference exists in the revenues of both these companies. A look at the current earnings shows us that the comparable store sales of Starbucks (NASDAQ:SBUX) was much better than the sales of Dunkin’ Brands (NASDAQ:DNKN). The same-store sales for Dunkin’ (NASDAQ:DNKN) increased by 1% and the earnings increased by 4% whereas Starbucks (NASDAQ:SBUX) had an increment by 7% in SSS and a growth of 11% in its earnings.

Starbucks (NASDAQ:SBUX) had increased its prices some months ago by a 5-20 cent increment in the price of the beverages and the packaged coffee price increased by a dollar. The company had also increased the prices previously, in the midst of 2013 with little effect on its sales.

The main difference between both coffee brands is that Starbucks (NASDAQ:SBUX), with its superior brand, mostly provides services to more well-off consumers. This is the reason that prices hikes never affect their sales or customers in any way which is the reason why Starbucks (NASDAQ:SBUX) enjoys the increased gross profit margin as a result.

The company’s top management, including the investors, should be very optimistic about the new launch of their beverages. These beverages include an iced tea named Teavana and another summer drink called Fizzio. The newly launched drinks will be a way to get consumers to purchase in the afternoon or at evenings. The company has installed the soda machines for Fizzio in many of the company’s retail stores in United States which is expected to bring a lot of increase in profits.

Starbuck’s (NASDAQ:SBUX) had recently introduced its mobile application which has proved to be a great success in getting customer loyalty. The app has dual benefits; customers get to pay easily through their phones and secondly, they are given rewards automatically.

The company’s stocks were deflated last year and the results were very unsatisfactory. The stock price at $78 per share does not seem to be a fair price. The P/E ratio had been 25x. Starbucks (NASDAQ:SBUX) still seems to be a company that grows at a better percentage compared to its competitors where earnings are concerned.