Is an Outperform in Starbucks’s Future?

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With shares of Starbucks (NASDAQ:SBUX) trading around $73, is SBUX an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Starbucks is a roaster, marketer, and retailer of coffee operating worldwide. The company purchases and roasts the coffees it sells along with handcrafted tea and other beverages, as well as a variety of fresh food items through its stores. Starbucks sells a variety of coffee and tea products and licenses its trademarks through other channels like stores and national food service accounts. In addition to its flagship Starbucks brand, the company’s portfolio features Tazo Tea, Seattle’s Best Coffee, Starbucks VIA Ready Brew, Starbucks Refreshers beverages, and the Verismo System by Starbucks. Starbucks has developed a solid reputation over the past several years, which has generated a lot of buzz for its products.

Starbucks has a tight grip over the coffee industry, but Wired published a report Tuesday that illuminates the company also has an increasingly solid grasp on another sector that also significantly affects consumers: the banking one. The idea of the Starbucks card and virtual payment is no longer foreign to anyone, but Wired pointed out earlier this week that thanks to the current situation of the banking industry — a division that has seen better days — the coffee company has an increased opportunity to have a tighter hold over its customers and facilitate more bank-like transactions that consumers may be oblivious to.

Wired starts out its report by making the argument that in this day and age, you likely make more trips to Starbucks than your local bank branch, and it’s probably right. Then, it brings up the idea of Starbucks’s pre-paid cards, or “loyalty cards.” These can act as savings accounts and put Starbucks in charge of a lot of your money — an amount that banks could even be envious over. At this point, Starbucks’s prepaid cards represent two traditional banking functions now being handled by the coffee chain — payments and storing money.

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