As global coffee and food chain Starbucks Inc. (SBUX) struggles to boost its U.S business, reporting lower-than-expected same-store sales for two consecutive quarters, one team of analysts expects mobile orders to send shares up nearly 40%. (See also: Starbucks Hikes Prices Amid Pumpkin Spice Revival.)
The Seattle-based coffee giant has been perfecting its ordering process via smartphones, suggests Mizuho analyst Jeremy Scott, who has a buy rating on shares along with a $75 price target. After admitting that the new process was initially hurting the in-store experience, the analyst says Starbucks appears to be working out the kinks by means such as hiring an individual at each store with the sole responsibility of making sure the mobile ordering process is running smoothly.
NYC App Orders Have Doubled
“Total turnaway rates and in-store wait times are declining, indicating improving satisfaction,” wrote Scott after surveying a handful of Starbucks’ New York locations. The analyst highlights rapid traction of the mobile platform, now behind 30% of New York City transactions, compared to 25% in June and just 17% one year ago. Nationwide, the company says 9% of total orders were made digitally in advance over the most recent quarter.
Scott highlights the importance of mobile ordering as a driver of brand loyalty, noting that rewards members accounted for 36% of sales in Q2 but just 18% of Starbucks’ customer base. The program, which is intended to incentivize repeat orders, sends notifications and is there to remind customers of coffee and snacks with just a glance at their smartphones.
Trading down 1.4% on Friday afternoon at $53.74 per share, SBUX reflects an approximate 3.2% decline year-to-date (YTD) versus the S&P 500’s 12.4% rally over the same period. (See also: Starbucks Stores Are Finally Cannibalizing Each Other: BMO Downgrades.)