UBS: The Unicorn Frappuccino will drive Starbucks higher
In a note circulated to clients on April 24, titled "Outlook is All Rainbows and Unicorns," Geiger reaffirms his "Outperform" rating and $70 price target.
"We also anticipate cold beverages LTOs [limited-time offers] to supplement the permanent platform and provide additional sss benefits, such as the recent Unicorn Frappuccino, which was offered for one week this month," Geiger wrote.
"Many of our channel checks indicated that drinks were sold out in stores before the promotion ended (with customers visiting multiple locations to find the drink), and stores indicating 20+ customers per day coming in for the viral drink which generated ~180,000 hits on Instagram in just one week."
But limited-time offers like the Unicorn Frappuccino aren't the only new products that Geiger sees in the pipeline.
Currently, food makes up 20% of Starbucks' revenue, and the chain wants to get that figure up to 25% over the next five years. Geiger sees multiple food opportunities for growth including green healthy foods prepared daily, like the "Green Goddess Avocado" salad and "Burrata & Basil Pesto" sandwich which were recently introduced in Chicago.
Meanwhile, Starbucks CEO Kevin Johnson is focused on digitizing the consumer experience, and Geiger has taken note. He says digital is the key to Starbucks' future with its My Starbucks Rewards program already boasting about 13 million members and a 20% growth rate.
Turning to the company's financials, Geiger says Starbucks' valuation makes it a buy:
Click here for a real-time Starbucks chart.
