Cowen: Starbucks Could Be Poised To Benefit From 'Digital Enhancements'

In a report published Wednesday, Cowen and Company analyst Andrew M. Charles initiated coverage of Starbucks Corporation (NASDAQ: SBUX) with an Outperform rating and a price target of $56.

"[The] key to reaccelerating comps is growth in the SBUX Card and mobile payment, which fuels the company's digital initiatives. Mobile ordering will help expedite traffic growth while increasing the food attachment to boost ticket," Charles wrote.

The company's share price came under pressure last year. Following this, the analyst expects valuation to "continue to expand."

"SBUX strongly fits our theme of using guest-facing technology as a competitive advantage to drive sales through the MSR loyalty program as well as through mobile payment," Charles commented. Starbucks' digital initiatives have the power to drive traffic on the back of thru-put enhancements and a focus on growing the La Boulange food attachment rate.

The analyst considers the recent decline in Starbucks Card loads growth and mobile payment adoption as "fixable," since these initiatives have "a long runway for growth." Starbucks has the opportunity to boost its mobile payment mix above the current 15 percent of transactions.

"In addition, the company is rolling out mobile ordering in calendar 2015, which we estimate will produce a 0.5%-1.1% benefit to Americas same store sales and $0.02-$0.04 of incremental EPS once fully rolled out in FY 2016," the report mentioned, while adding that the company has "demonstrated a high commitment to remaining cutting-edge in the digital realm," which could "pay dividends for years to come."