Please ensure Javascript is enabled for purposes of website accessibility

3 Reasons Why Starbucks Could Win as Students Return to Classrooms

By Parkev Tatevosian, CFA – Updated Aug 25, 2021 at 4:11PM

Key Points

  • Starbucks could eclipse its 2019 annual revenue figures this year.
  • Starbucks has an estimated 300 locations on college campuses.
  • The risk remains that COVID-19 outbreaks will send students home again.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Students in some cities have been learning remotely for over a year.

Millions of students will be returning to classrooms this month. For Starbucks (SBUX 0.04%), that will be an opportunity to capture more sales as people leaving their homes are more likely to visit one of its locations. 

The company's revenue was harmed during the pandemic as folks were working from home, learning from home, and entertaining themselves at home. This left fewer occasions when one could frequent a Starbucks store on their way to work, school, or a ballgame. Now, in this next leg of economic reopening with students returning to classrooms, Starbucks can benefit in three ways. 

Two people sitting in a car and the person in the passenger's seat is drinking a beverage.

Image source: Getty Images.

1. Returning to the office

The coronavirus pandemic sent millions of employees home to work remotely, some others were put on furlough, and millions more lost their job completely. According to the U.S. Bureau of Labor Statistics, there are now three million more unemployed people than there were in the month before the pandemic's onset. That's despite businesses complaining there are more open jobs than people they can find to fill them.   

Although several factors could be playing a part in the mismatch, one factor was the lack of affordable child care. Kids were learning remotely at home and needed to be supervised by at least one parent. Now that many kids will be returning to classrooms, that parent can go back to work outside of the home. 

Interestingly, estimates show that the average office worker drinks 1,000 cups of coffee per year. With some parents of school-aged children returning to offices, coffee consumption could increase . And since Starbucks is one of the leading places people go to get coffee, it is likely to benefit from that increased consumption.

2. Going back to school 

With students returning to classrooms, it creates an increase in consumer mobility. Students will need to get to school and get home from school, and some of them will need to be accompanied by a parent or guardian. Those are two additional occasions during the day where a person may decide to stop at a Starbucks to quench their thirst with a "cup of Joe."

Starbucks has 15,348 locations in the U.S. Chances are there is one near the route you take to school from your home or job. Indeed, management said, "The reopening of markets is translating to incredible increases in demand for Starbucks as people are again on the go, reconnecting and socializing with one another."

3. Heading back to college

Finally, the return of in-person classroom learning means Starbucks can reopen its more than 300 locations on college campuses. Importantly, it may appear like a small fraction of its overall stores in the U.S., but these are often  high-performing stores. Campuses usually have thousands of students coming and going from morning till night. At least some students studying for exams and completing research reports will likely visit the Starbucks on campus for a little pick-me-up. 

What this could mean for investors 

Starbucks is well on its way to recovering lost revenue from the pandemic. Management guided investors to look for annual revenue of about $29 billion in fiscal 2021. That figure would be roughly 10% higher than its annual revenue in 2019 -- before the disruption caused by the pandemic in 2020.   The return to classrooms and offices could enhance that growth even further. Still, there is the chance that an outbreak of COVID-19 cases in schools or the general population could cause cities and states to send students back to remote learning and employees back to remote working. Barring that outcome, Starbucks could get a sales lift from the return to the classrooms.

Mind you, the stock is near all-time highs, so much of these good prospects may be priced in at the moment, but any nearterm dips could be a buying opportunity. 

Parkev Tatevosian owns shares of Starbucks. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool recommends the following options: short October 2021 $120 calls on Starbucks. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Starbucks Stock Quote
Starbucks
SBUX
$99.56 (0.04%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.