Starbucks (NASDAQ: SBUX) announced a five year growth plan on December 4th during its biennial investor conference. The plan includes the debut of the first Starbucks Reserve Roastery and Tasting Room; a high-end coffee house that will offer rare coffee beans and an immersive coffee experience.
The first Reserve Roastery opened last week in Seattle. The 15,000 square foot facility offers an interactive coffee experience and every Reserve coffee bean will be roasted in the new facility. Liz Muller, the vice president of Concept Design, said the space is designed to “heighten all the senses” and offer a “real-life Willy Wonka experience with coffee as the heart and soul.” The new store will offer a food menu to complement various coffee blends and boards within the store will teach consumers about the origin and production of each bean. Starbucks plans to open 100 more stores that will offer rare batches of coffee in major cities.
Howard Schultz, CEO, said the new Roastery in Seattle “is the fulfillment of a decade-long dream – a homage to our relentless pursuit of coffee innovation that will create for our customers the most immersive, sensory demonstration of how we source, roast and craft the finest coffee from around the world.”
More highlights from the five year growth plan include a 2019 revenue projection of $30 billion; up from $16 billion in 2014. Starbucks also plans to expand Mobile Order & Pay throughout the United States in 2015. The feature has launched in Seattle and it allows customers to order and pay before entering a Starbucks location.
Troy Alstead, Chief Operating Officer, commented, “Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets… With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience.”
On December 5th, analyst Sharon Zackfia of William Blair reiterated an Outperform rating on Starbucks, though no price target was provided. Zackfia noted Starbucks’ plan to “nearly double its revenue” by 2019, which represents “annual revenue growth of roughly 11% after adjusting for the pending acquisition of Starbucks Japan.” Starbucks has the potential to “generate at least $5.50 in EPS by fiscal 2019, representing a more than doubling from last year’s EPS and a continuation of 15% to 20% annual EPS growth.” Zackfia continues to “view Starbucks as a core large-cap consumer holding given its resilient sales trends, strong global growth prospects, and high visibility on 15% to 20% annual EPS growth.”
Zackfia has a 63% overall success rate recommending stocks with an average return of +14.7% per recommendation.
Separately on December 5th, analyst Bonnie Herzog of Wells Fargo resumed Starbucks coverage with a Buy rating and a price target of $94. Herzog has an 80% overall success rate recommending stocks with an average return of +10%. She has rated Starbucks 7 times, earning her a 75% rate recommending the stock with an average return of +9.1% per Starbucks recommendation.
On December 5th, Starbucks opened $82.51 per share. The coffee giant has a 1-year high of $83.92 and a 1-year low of $67.93. Its daily moving average is $83.18 and its 50-day moving average is $77.82. The market cap is 62.54 billion and its P/E ratio is 30.84.
Investors and executives seem optimistic about Starbucks’ future and the new Reserve Roastery, but is now the time to Buy?