Starbucks Corporation
(
SBUX
) recently announced its partnership with Square, a company that
offers credit card readers for iPhone, iPad and Android devices,
for enabling smooth credit and debit card transactions. The
partnership will allow Starbucks customers to use Pay with Square,
a mobile application, for making quick payments at about 7,000
Starbucks stores.
Starbucks is set to invest $25 million in this partnership and
Starbucks chairman, president and CEO Howard Schultz will join
Square's board of directors. Customers can now make payment for
their purchases from Starbucks stores using the Pay with Square
mobile application in addition to the existing iPhone and Android
Starbucks mobile payment applications.
Further Starbucks' customers can easily access the local Square
businesses, through the use of the Square Directory and make
payments for their purchases using the Square application.
Starbucks can also reach out to more customers through the Square
Directory.
Pay with Square is intended to serve small businesses by providing
them with easy and affordable card processing services, thus
liberating them from hassles associated with payments in credit and
debit cards. As far as the Starbucks-Square partnership is
concerned, it will significantly reduce the interchange fee
associated with the use of debit and credit cards and enhance
mobile payment services, thus encouraging business growth.
Our Recommendation
Starbucks carries a Zacks #4 Rank in the near term (Sell rating).
Last month, Starbucks announced its fiscal third quarter 2012
results. Starbucks' third quarter earnings of 43 cents per share
missed both the Zacks Consensus Estimate of 45 cents as well as
company expectations of 44 cents - 45 cents. The
lower-than-expected results were due to soft consumer traffic
trends in the U.S. in June and a weakening global consumer
environment.
Following the first quarter miss, the company cut its outlook
for the fourth quarter due to the economic downturn at large.
Further, poor sales in Europe due to depressed macroeconomic
conditions and rising cost of commodities, especially coffee also
concerns us. The weak third quarter results explain the bearish
rank on the stock.
STARBUCKS CORP (SBUX): Free Stock Analysis
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