This fall, global coffee chain Starbucks Inc. (SBUX) plans to roll out more of its cloud-based Digital Flywheel program. Backed by artificial intelligence (AI), the new technology is intended to suggest orders before customers even think about what they want and make a guess on what they are most likely to agree to purchase next.
The Seattle-based corporation’s global chief strategy officer, Matthew Ryan, says the program offers "real-time triggers and push notifications to engage customers more deeply, building on the momentum that is generating the higher spend per members." (See also: Rise of Hipster Coffee Shops Won’t Hurt Starbucks: Bernstein.)
Coffee Giant Is a Buy on Recent Sell-Off
As Starbuck’s shares plunged 10% on last week’s weaker-than-expected Q2 results, bulls look at such long-term tech innovation as presenting upside. For example, while Starbucks faces short-term issues with its mobile ordering, analysts at Mizuho remain upbeat that its investment in the new technology presents a buy opportunity as the Street sells off the stock on temporary growing pains.
“The fact that the stock has tumbled is a reflection of what happens in the face of disruption,” said Brian Solis, a principal analyst at Altimeter, in an interview with TheStreet. “Shareholders tend to want shorter-term results, versus longer-term investments.” Solis believes that Starbucks’ integration of mobile, loyalty, sales and AI, in efforts to “deliver extreme integration,” will prime Starbucks for a boom in demand for its food and beverage products.
Arguing the bear case, analysts at Stifel downgraded SBUX to hold from buy on Thursday, estimating that mobile transactions per store growth is slowing, “up mid-teens year-over-year (YOY) for the last two quarters and decelerating on 2-year basis.”
The announcement reflects the strategic integration of technology into ecommerce tools as major consumer-facing companies double down on their digital initiatives to drive sales. (See also: Starbucks to Overcome Mobile-App Issues: Analyst.)