Starbucks Corp. (SBUX) is expanding its reach to customers across the Chinese mainland by introducing its mobile order and pay feature on four of Alibaba’s (BABA) digital platforms.
The “Starbucks Now” mobile pre-order and in-store pick-up feature will be launched on Alibaba’s Taobao, the mobile mapping and information provider Amap, local services app Koubei and Alipay. Before that, the feature was only available on the coffee chain’s own app.
The extended service will connect Starbucks with more Chinese consumers through multiple channels that tap into Alibaba’s user base of nearly 1 billion.
“The COVID-19 pandemic highlights the importance of digitalization, which is the cornerstone for any successful brand in China,” said Toby Xu, Vice President of Alibaba. “Through this partnership, we will continue to support Starbucks in expanding its digital service offerings across China to meet ever-evolving customer preferences and create long-term value.”
Earlier this year, the COVID-19 lockdown severely disrupted much of China’s offline retail. As the country emerges from the pandemic, retailers are seeing an uptrend in foot traffic while online business remains robust, Alibaba said. The expansion in China builds on Starbucks’ retail partnership with Alibaba formed in 2018.
Starbucks shares have been hard hit this year and despite some recovery, they are still trading down 15% year-to-date.
Wells Fargo analyst Jon Tower, who initiated the stock this week with a Buy rating and a $92 price target (23% upside potential), believes that Starbucks can overcome the headwinds of the coronavirus pandemic, which has left customers stranded at home.
“Investors currently underappreciate the pliability of Starbucks’s business model and sustainability of long-term sales drivers in the presence of temporary disruptions of the business related to Covid-19,” Tower wrote in a note to investors cited by Dow Jones.
Tower is confident that Starbucks’ operating model and strong balance sheet, “will allow management to quickly return the company to its previously stated long-term growth targets”.
Meanwhile, the rest of the Wall Street community is cautiously optimistic on the stock. Recent ratings by 23 analysts show 14 Holds versus 9 Buys adding up to a Moderate Buy consensus. The $80.29 average price target reflects analysts’ expectations that shares will advance 7% over the coming year. (See Starbucks stock analysis on TipRanks).
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