On Friday, Starbucks released 5,000 limited edition cards made of steel on the luxury goods site, Gilt.com. In the end, the card costs $450 with $400 of the balance able to be used for credit towards Starbucks (NASDAQ: SBUX) purchases. Shockingly enough, the site sold out of the metal cards in less than one minute and the only place you will be able to find them in on eBay (NASDAQ: EBAY), where there are reportedly 93 metal cards for sale.
The only difference is that the cards on eBay are now being sold for much higher than the original price. In fact, a Starbucks metal card was recently sold on eBay for $1,074. Here are some examples of live auctions on eBay right now: $851, $900, $760, buy it now 1,249.99 and that’s just the beginning of the madness on eBay. As you see, there are either some hardcore Starbucks drinkers or there are a lot of savvy long term collectors who saw a potential opportunity and jumped at the bit. Either way, that is quite a hefty price tag and I did not suspect them of being hot sellers, especially in this economy.
At this point, you have to consider the fact that people are paying over twice face value for the card on eBay than if they had just bought it at the much cheaper, original price. As an investor, this action is catching my attention. If Starbucks can sell all 5,000 metal gift cards in under a minute and people are willing to pay over twice as much on eBay, you have to at least give Starbucks a look for a potential investment.
Upon further review, I have noticed that the underlying price of coffee has taken a nosedive this year, making Starbucks’s cost fall and profits rise, as the demand for Starbucks coffee stays relatively unchanged. Furthermore, the company recently announced they would open up an additional 3,000 new stores in the Americas, with over half coming to the US. As you can see, the company has certainly turned itself around by really focusing on same store sales and making each Starbucks have that upscale café feel.
Aside from the steel cards flying off the shelves, price of coffee falling and plans to open 3,000 new stores, the company recently purchased Teavana Holdings (NYSE: TEA) in an effort to expand its menu and take on rivals such as Peet’s Coffee (PEET). Next year, we should see the full integration of Teavana into the Starbucks brand. I like the fact that Starbucks bought Teavana because the coffee company is looking to expand its offering to have natural teas and other tea related products.
The bottom line here is that Starbucks has a lot of good going on for them. Moving forward, the company needs to continue to integrate Teavana into its business and I think this will help strengthen the image and increase customer traffic. Furthermore, the underlying price of its product, coffee, has been falling like a rock, giving the restaurant a chance to maximize profits while maintaining a low cost figure. Overall, I think Starbucks deserves a look as a long term investment with my twelve month target coming in at $60.
