21.34 +0.17 (0.80%)
After hours: 5:18PM EDT
|Bid||21.32 x 2200|
|Ask||21.35 x 1800|
|Day's Range||19.64 - 21.27|
|52 Week Range||13.71 - 25.96|
|Beta (3Y Monthly)||N/A|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||32.00|
The sovereign-wealth funds of Qatar and Singapore disclosed large stakes in the Chinese coffee chain. A unit of Capital Group also bought up Luckin stock.
Investors looking for a good Chinese growth stock should buy Luckin Coffee (NASDAQ:LK).Source: Shutterstock And anyone who has bought the shares of Chinese electric-vehicle maker Nio (NYSE:NIO) should dump their Nio stock and buy Luckin Coffee stock instead. Luckin Coffee Stock Is Everything That Nio Stock Is NotLuckin Coffee stock has all the characteristics of an excellent growth stock. Luckin is growing rapidly, has created a product that millions of people love, isn't facing tough competition, can easily grow a lot more and can quickly become profitable.InvestorPlace - Stock Market News, Stock Advice & Trading TipsLuckin's revenue jumped from $12.9 million in the first quarter of 2018 to $478.5 million in Q1 of 2019. Clearly, its products are resonating with millions of people in China. According to KeyBanc, the company "provides quality coffee at almost half the prices seen on the menus of Starbucks Corporation (NASDAQ:SBUX) and the British brand Costa Coffee." * 7 Stocks to Buy for the Coming Recession Another research firm, Needham, believes Luckin has a huge growth opportunity. The firm wrote that Luckin is "disrupting the coffee industry in China … and gaining market share in China's coffee market which is characterized by rapid growth," Investor's Business Daily reported. Needham started Luckin Coffee stock with a "buy" rating, while KeyBanc initiated it with an "overweight" rating. Importantly, Luckin Coffee looks well-positioned to become profitable, especially given its rapid top-line growth. In 2018, the company generated a gross profit of $308.5 million. Although its high total operating expenses of $2.4 billion prevented it from being in the black overall, the impact of the operating expenses -- many of which are fixed costs like paying executives and conducting R&D -- on its bottom line will decrease as revenue grows.Conversely, as InvestorPlace columnist Vince Martin pointed out in a piece published earlier this month, Nio is facing very tough competition, and its deliveries plunged nearly 50% in the first quarter versus the previous quarter. NIO itself has warned that its competition is becoming more formidable, even though, as Martin noted, its "market share is miniscule."Indeed, the company is competing against at least eight other electric-vehicle makers, including BYD (OTC:BYDDF), which obtained an investment from Warren Buffett, and BAIC, which is owned by the government of China. Additionally, foreign automakers, including Tesla (NASDAQ:TSLA), GM (NYSE:GM), Volkswagen (OTC:VLKAF), and Ford (NYSE:F), are preparing to sell electric vehicles in the Chinese market.In three of the last four quarterly results reported by Nio, the company's gross profit has been meaningfully negative, so it's nowhere near being profitable. Given that stat, along with Nio's tough competition and the fact that its revenue dropped meaningfully last quarter, I agree with Martin's warning that Nio stock price could easily hit zero. Luckin Stock Is a Much Better Buy Than NIO StockDespite the tremendous disparity between the companies' performance and outlook, Luckin Coffee stock is not that much more expensive than Nio stock. Luckin looks much more expensive on the surface because its price is over $18 per share and Nio stock price is barely above $2 per share. But Luckin Coffee stock has a market cap of $4.14 billion, while the market cap of Nio stock is $2.75 billion. The enterprise value-sales ratio of Luckin Coffee stock is a bit over three, while that of Nio stock is a bit under two. In other words, even though Luckin's business is so much better positioned than that of Nio's, Nio stock isn't much cheaper than Luckin Coffee stock. The Bottom Line on Luckin Coffee Stock and Nio StockLuckin's business is booming and the company faces very little competition -- it will soon be profitable.Nio's business is weakening, it faces intense competition, and it isn't going to be profitable anytime soon. * 7 High-Quality Cheap Stocks to Buy With $10 Luckin's outlook is very strong, while NIO has a good chance of going belly-up. And, yet, Luckin Coffee stock isn't that much more expensive than Nio stock. Clearly, investors looking for a Chinese growth name should dump Nio stock and buy Luckin Coffee stock.As of this writing, Larry Ramer did not own any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Stocks to Buy for the Coming Recession * 10 Smart Dividend Stocks for the Rest of the Year * 5 Tech Stocks That Are Far Too Risky Right Now Compare Brokers The post Sell Nio Stock, Buy Luckin Coffee Stock appeared first on InvestorPlace.
Shares of China’s Luckin Coffee could jump significantly over the next 12 months, according to 3 analysts who initiated coverage for the stock on Tuesday.
Luckin Coffee got bullish coverage, as analysts said the new IPO and so-called Starbucks of China should see "lots of growth." Luckin Coffee stock was down.
Luckin Coffee Inc – ADR (NASDAQ: LK ) has a number of strategic advantages, including exposure to China’s rapidly evolving coffee culture, limited competition, low costs and better analytics than peers, ...
Analysts who have weighed in so far like Luckin’s strategic store positioning, competitive coffee pricing compared to rival Starbucks Corp and expansion potential in the Chinese market. Shares of the Xiamen, China-based Luckin rose 8.5% from the May 16 initial public offering through Monday close, after dipping below the $17 offering price last month.
Alibaba's (NYSE: BABA) food delivery platform, Ele.me, has shown rapid growth in the past few quarters. The recent quarterly report of its rival Meituan indicates signs of lower price wars with Ele.me. Meituan's quarterly loss in the recent quarter was $207 million, less than half the consensus estimate by analysts, while the growth rate was 70%. Ele.me and Meituan have formed a duopoly in food delivery and other consumer services in China. Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading TipsAfter the initial heavy discounting strategy, both these companies are looking to reduce their losses. This should be a significant tailwind for long term margins and Alibaba stock.Ele.me had a revenue share of 5% in the latest quarterly results of Alibaba with revenue of $785 million. This share can increase to 10%-15% by the next fiscal year due to faster growth in this segment. Improvement in margins in Ele.me should increase the overall revenue growth of Alibaba. This will increase its EBITDA significantly. Investors should closely look at the future growth potential of this service. Duopoly Shows Lower CompetitionFood delivery is another segment where Alibaba and Tencent are competing. Meituan is backed by Tencent and was listed in late 2018. After the listing, Meituan saw significant stock decline, however, it has made some recovery in the last few weeks. One of the reasons for more positive sentiment towards Meituan is the lower discounts offered by the company to gain market share. * 7 Dark Horse Stocks Winning the Race in 2019 In the initial growth phase, both Meituan and Ele.me relied on heavy discounting to attract restaurants and customers to their services. Both these competitors are now moving away from discounts. Massive discount led to big losses in Ele.me and also hurt Alibaba stock.but an easing of that headwind has reduced the losses in Meituan. A similar trend should be shown by Ele.me in the next few quarters. Alibaba has integrated Ele.me with Koubei to form a separate segment called "Local Consumer Services."Fig: Ele.me revenues are shown within local consumer services division. Source: Alibaba FilingsThe market share of Meituan is still higher than Ele.me. Meituan's market share is 63.4% according to Trustdata. Ele.me, meanwhile, has integrated its services within Alibaba's Taobao and Tmall apps. In the recent quarterly report, Alibaba mentioned that 30% of the customers on Ele.me come through these apps. This is a big positive, and better integration of Ele.me with other apps within Alibaba's ecosystem will improve the moat of these services. Future Direction for BABA StockThe delivery market is far from saturation in China. We should continue to see more services added to the delivery platforms, increasing the growth potential of Ele.me and also helping build a better last-mile logistics network. Ele.me is in discussion to add Luckin Coffee (NASDAQ:LK) to its delivery network. Luckin is the main rival of Starbucks in China and was valued at $4 billion in the recent IPO.Alibaba is rapidly building its grocery store format called Fresh Hippo. Recently it opened its 150th store and has plans to ramp up the store openings in many cities. The delivery network of Ele.me would be a big boost to this grocery business. It should be noted that Ele.me's delivery network is much more closely integrated with Alibaba's ecosystem compared to Meituan's integration. Hence, Alibaba has a number of options to monetize every additional member on Ele.me.Alibaba has also been replicating Ele.me's model in other international regions. One of the faster-growing regions for delivery services is India where Alibaba has invested in Zomato, a leading player. Last year, Ant Financial invested over $400 million in the company. In the recent annual report, Zomato mentioned a 3x jump in revenue. Zomato is competing against Swiggy in this region, which is backed by Tencent (OTCMKTS:TCEHY).Source: ZomatoWe should see a similar trend in delivery services in other regions of South Asia and Southeast Asia. This opens a greater opportunity for Alibaba. A healthy margin by Ele.me in China should help in improving the future expectations from these services in other international regions. This should lead to better sentiment towards Alibaba stock as the company expands its international business. Path to IPOTencent has been quite eager to go to the IPO route for its different services. In 2018, we saw IPO of Meituan and Tencent Music, and we could see more. Alibaba has not taken this path till now. But it is likely that Alibaba will also try out this approach, as it will be able to invest in other growth segments. Meituan has a valuation of $40 billion while Tencent Music has a valuation of over $20 billion. Alibaba can take IPO option for Ele.me and Youku (its digital media segment) to get a better standalone valuation for these businesses. Reuters has reported that Alibaba is looking for a secondary listing of $20 billion in Hong Kong. This option should also help in getting a better valuation for Alibaba stock. Currently, Tencent, which is listed in Hong Kong, is valued at 24 times its forward earnings. Alibaba is trading at around the same level, but Alibaba's revenue growth has exceeded Tencent for the past six quarters. In the recent quarter, Tencent reported revenue growth of only 16% compared to 39% by Alibaba after adjusting for acquired businesses. Investor TakeawayAlibaba's food delivery platform, Ele.me, is seeing lower price competition. The discount wars between Meituan and Ele.me have reduced considerably. This has helped Meituan post better results in the latest quarter, so Ele.me should also see an improvement in margins. The recent revenue from this platform was $765 million with a 5% revenue share. That revenue share metrics should increase substantially as new services are added to the delivery network. Better margins and higher revenue share from Ele.me should lift the overall margins for the company and increase the bullishness towards Alibaba stock.Alibaba is also replicating this model in other regions. This will help the company in diversifying its revenue base and also improving the growth prospects in international regions. Alibaba can use the IPO route for Ele.me which should improve the valuation for this business and allow the company to divert resources to other profitable segments like cloud.As of this writing, Rohit Chhatwal did not hold a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Dark Horse Stocks Winning the Race in 2019 * 6 Chinese Stocks to Sell That Are Suffering From a Digital Ad Slowdown * 4 Technology Stocks Blasting Higher Compare Brokers The post Alibaba's Delivery Platform Provides a Big Opportunity appeared first on InvestorPlace.
Starbucks stock surged to an all-time high for a third straight session, amid sinking coffee prices and optimism from the firm over its China expansion.
Melvin Capital Management and Darsana Capital disclosed that they each own millions of American depositary shares of the “Starbucks of China.”
Competition in the Chinese coffee market will challenge Starbucks, but the Seattle giant can still rely on that market to help drive growth because of its differentiated model, according to new research.
Shares of Xiamen, China-based Luckin Coffee soared as much as 53% to $25.96 on May 17, their first day of trading in the U.S. Since then, the stock has plunged 39% from that peak, even with a rally in the final half hour of trading Thursday that gave Luckin a 7.1% gain for the day. Luckin’s 7.1% decline from its offering price of $17 per share -- to $15.79 as of Thursday’s close -- isn’t as bad as the performance from ride-hailing company Lyft Inc., which is down 20% from its offering price of $72 in late March.
Luckin’s IPO turned some heads and raised some questions, but there’s no doubt the Chinese market potential for coffee is enormous.
Investor Updates: The Latest Buzz from Alibaba(Continued from Prior Part)Alibaba seeking coffee delivery business from LuckinAlibaba (BABA) is in talks for a contract to deliver coffee products for Luckin Coffee (LK) customers in China, according to
Shares of Luckin Coffee fell Wednesday morning, joining the likes of Uber and Lyft by dropping below its initial public offering price days after its debut.
Luckin Coffee (NASDAQ:LK) was down 6.7% in midday trade Wednesday, falling below its initial public offering price less than a week after it debuted.
2019 has arguably been the best year for IPO stocks in two decades. Sure, other years have had one or two big offerings that have captivated the market. But 2019 is shaping up well for both the breadth of the IPO stock pool and the star power of some sizzling headlining names.Not only do we have the seven IPO stocks discussed below, there are more on the way such as Slack and AirBnb. After years of many of the country's fastest growth companies remaining stuck in venture-capital hands, we public investors are getting our shot at a ton of exciting growth companies. * 7 Stocks to Buy for Over 20% Upside Potential But discretion is required. Not all new IPOs are bound for greatness. In fact, with the IPO stock window wide open, banks are using this opportunity to push out all sorts of new offerings to the public. Some of these will work out well, and others will be flops. Here's what you need to know about seven of the year's biggest IPO stocks so far.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Hot IPO Stocks: Uber (UBER)Source: Shutterstock Morgan Stanley's Michael Grimes is developing a spotty reputation. The bank's leading IPO dealmaker was responsible for both the Facebook (NASDAQ:FB) and Uber (NYSE:UBER) IPOs. FB stock dropped more than 50% in the months after its IPO. Meanwhile, the Uber IPO came in far short of expectations and has traded fairly poorly, even after the downbeat IPO price.However, if we learned anything from Facebook stock, it's that a flop IPO isn't a death sentence for a public company. After its terrible trading debut, Facebook turned the corner. Mobile advertising started to take off and shares now trade for around 4x their IPO price. Will Uber be able to make a similar turnaround?Uber's financials are certainly troubling. The company isn't a huge profit generator like Facebook, at least not yet. But it's the leader in ride sharing both in the U.S. and dozens of overseas markets. On top of that, Uber has advanced aggressively into other adjacent markets, like food delivery.Uber is a high-risk, high-reward play, for sure. There's a chance that the company will never become profitable and go bust. But it's the clear dominant market leader, and the market should reward them for that.Don't invest funds that you can't afford to lose, but if you have a high risk tolerance, UBER stock is a buy here. Lyft (LYFT)Source: Shutterstock To be fair, Lyft (NASDAQ:LYFT) stock hasn't been one of the hot IPO stocks over the past weeks. In fact, it has taken quite a tumble since it IPOed at $72 and subsequently started trading at $87. As always, however, price matters. Lyft stock is a far more interesting investment candidate here at $55 than it was when the stock debuted.There are good reasons to be bearish on LYFT stock. Our Dana Blankenhorn offered a solid take. He warned about the company's share lock-up expiry in September, its issues with self-driving vehicles and its potential for running out of cash before it becomes profitable. These are all valid concerns. Their first quarterly earnings report did nothing to impress those who are doubting Lyft's business model either. * 7 High-Yield REITs to Buy (Even When the Market Tanks) But I think it's too early to throw in the towel on Lyft as an investment idea. Ride-sharing is already a big market, and it's only going to get bigger in coming years. In the U.S., Uber and Lyft dominate the market with little additional competition. As such, this offers an opportunity for both firms, gradually, to raise prices and reach profitability or at least slow down cash burn.It's possible that LYFT stock collapses, particularly if the stock market as a whole goes south. But for now, the company's rapid growth should be enough to keep traders interested in the stock at its significantly reduced valuation. I rate LYFT stock a hold. Beyond Meat (BYND)Source: Shutterstock Beyond Meat (NASDAQ:BYND) has taken the stock market by storm, offering the hottest-trading IPO of the year so far. BYND stock, which IPOed at a measly $25 per share, has now soared to as high as $97 and even after a big drop today is still holding around the $82 mark now.First things first, Beyond Meat has a great story. The company offers what many are saying is the most compelling meatless burger option to date. Competitors have been trying to launch a plant burger since the 1980s, but it has been hard to get the texture and taste right. Apparently Beyond Meat has gotten closer than most. As a result of its success, Beyond Meat is picking up distribution rapidly in grocery stores and restaurants. Almost every week, we've been hearing about a new restaurant partnership.Unfortunately, the market has taken this great story and blown it totally out of proportion. BYND stock is now selling at 60x its annual revenues. Yes, Beyond Meat is doubling its revenues every year for the time being. But even at that growth rate, it'd still be selling for 15x sales in 2021. That's ridiculous for a food company. I'd be hard-pressed to justify more than 7x sales for a food producer once the growth rate starts to slow down.BYND stock made a lot of sense at its IPO price. Up here, however, it's simply priced too high to succeed. Other companies aren't going to acquire Beyond because it'd be too dilutive at this price-to-sales ratio. Meanwhile, Impossible Foods, funded by the likes of Bill Gates, is ramping up their competition to Beyond in the plant-based protein space.Once the hype wears off and the trading float frees up, BYND stock will drop sharply. That's not a judgment on the company. The valuation is simply too high for Beyond Meat's extremely limited sales and large losses at the moment. Needless to say, I rate BYND stock a sell. Pinterest (PINS)Source: Shutterstock Sometimes Wall Street can miss stocks if most analysts are outside of a company's core market. An example of this was Etsy (NASDAQ:ETSY). The stock started trading in 2015 around $28 per share. It traded down to below $10 at one point, and skeptics were giddily writing the company's obituary. The tables turned, however, as Etsy was able to prove its business model worked, and the stock has shot up more than 500% in recent years.There's no guarantee that Pinterest (NYSE:PINS) can be another success like Etsy, but I see the same opportunity for a misunderstood business model. Sure, Pinterest may not have the same wide user base as other social networks/shopping sites. What it does have is a core passionate user base. And at 80 million monthly active users in the U.S., there's certainly enough of a business here to achieve profitability if revenue per user can ramp up. * 6 Chinese Stocks That Could Pop On a Trade Deal Interestingly, the current valuation for PINS stock is just $15 billion or so. The company last raised money on the private market in 2017 at a valuation of around $12 billion. That means the company's growth since then -- including 60% revenue growth last year -- is coming at a reasonably cheap price for new shareholders.Sure, the company's first earnings report was a big dud and killed the stock's momentum. But that gives folks a chance to buy again at a decent price. Pinterest will need a better earnings report next time to get investors excited again. There's certainly a decent investment case though, regardless. I rate PINS stock a hold. Hot IPO Stocks: Luckin Coffee (LK)Source: Shutterstock Luckin Coffee (NASDAQ:LK) just launched its IPO last Friday. The IPO priced at $17 and traded to as high as $25 on its opening day. The caffeine high has quickly worn off, however, as LK stock is already back down below $19. Unfortunately for its shareholders, I see LK stock dropping a lot lower over the next year.On the surface, Luckin seems like an exciting opportunity. The company is aiming to be the Starbucks (NASDAQ:SBUX) of China. It has already expanded from a handful of stores at the end of 2017 to more than two thousand stores today. According to its IPO documents, it intends to overtake Starbucks in total store count by the end of this year. That's some pretty amazing growth.Unfortunately, Luckin's business model doesn't appear to be nearly as robust as Starbucks'. Last quarter, for example, the company had an operating loss of $78 million on just $71 million of sales. That's an incredible rate of money burning. Just cost of goods sold and rent for the store locations alone cost more than all the cash Luckin took in, and that's before you get to SG&A, marketing and other essential costs.Luckin needs far more sales from each store. Just setting up hundreds more stores will do little to fix the company's gaping losses when each store is losing so much money as it is. To make matters worse, Luckin's sales trajectory has slowed dramatically. I rate LK stock a sell. It has a ton to prove or shareholders will be dumping Luckin in a hurry. Tufin Software (TUFN)Source: Shutterstock Tufin Software (NYSE:TUFN) isn't the most popular of the IPOs on this list, but it could just end up delivering the best results for shareholders over the years. Tufin Software is a security services play. Two ex-employees from highly successful security firm Check Point (NASDAQ:CHKP) founded Tufin almost 15 years ago and have built it into an emerging power.Even though TUFN stock has already traded up from $18 to $22 following the IPO, it still represents solid value here. Its current share price represents a market cap of $730 million. That amounts to about 9x sales for a company that is growing revenues annually around 20%. Revenues have grown from $65 million to $85 million last year, and are on target to exceed $100 million this fiscal year. * 7 Stocks to Buy that Lost 10% Last Week Impressively, Tufin is already right on the verge of profitability. It has been generating EPS generally within a few cents of breakeven in recent quarters and has even come up with a couple of quarterly profits. Unlike many recent IPOs, TUFN stock priced at a reasonable valuation, leaving some gains on the table for its new retail shareholders. I rate TUFN stock a buy and wouldn't be surprised if it trades up to $30 over the next year. Zoom Video (ZM)Zoom Video (NASDAQ:ZM) has lived up to its name. ZM stock has zoomed from an opening day price of $62 to as high as $91. It's even more impressive when you realize that the stock IPOed at just $36. Zoom even managed to hit a new high on Monday before reversing as the stock market turned downward on China worries. I'd wait for a much bigger decline before considering a purchase of ZM stock, however.The main obstacle here is price. The company is selling at an incredible 65x sales at the moment. Generally, it's wise to avoid companies trading above 10x sales. Certainly, if a company is going for more than 20x sales, it has to have a stratospheric growth rate to justify it.Zoom doubled revenues last year, but it already appears to be slowing down a bit. It gets exponentially harder to maintain blistering sales growth as your base of revenues expands. By 2021, it wouldn't be surprising if Zoom's revenue growth rate is down to 50% annually. That'd still be great if the stock's valuation were more reasonable. But investors are paying more than $20 billion today for a company that has just $330 million in annual sales. That's an insane price. I rate ZM stock a sell and see it dropping back toward its opening print around $60.At the time of this writing, Ian Bezek owned FB stock. You can reach him on Twitter at @irbezek. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Stocks to Buy for Over 20% Upside Potential * 5 Large-Cap Stocks Holding Steady Amid Trade War Concerns * 7 ETFs for Healthy Healthcare REITs Compare Brokers The post Should You Buy, Sell, Or Hold These 7 Hot IPO Stocks? appeared first on InvestorPlace.
Luckin Coffee Inc., a China-based company that has quickly become a key competitor to Starbucks Corp. in that country, has filed paperwork to go public.
Hyper-growth China retail coffee operator Luckin Coffee (NYSE:LK) made its highly anticipated Wall Street debut on May 17, and it was nothing short of a smashing success. Strong investor demand propelled Luckin to price its IPO at $17, at the high end of its initial $15 to $17 target range. Then, Luckin Coffee stock opened at $25, up nearly 50% from its already boosted IPO price. To be sure, the stock fell off those $25 highs. But, as of this writing, LK stock trades between $21 and $22, or up more than 20% from its IPO price.Source: Shutterstock In other words, the Luckin Coffee IPO was a big success.This success is no fluke. Many people call Luckin Coffee "the Starbucks (NASDAQ:SBUX) of China." That comparison is pretty accurate. This is the fastest growing and second largest retail coffee operator in China, and is on track to soon become the largest player in the space. At the same time, the China economy is rapidly urbanizing and expanding, and the coffee market in that economy is surging higher.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAltogether, Luckin Coffee is the fastest growing and soon to be the biggest player in a very quickly growing Chinese coffee marketplace. Ultimately, as Luckin continues to expand share in this hyper-growth market over the next several years, Luckin Coffee stock will head higher.How much higher? Significantly higher. By my numbers, I think Luckin Coffee could be worth in excess of $10 billion one day. The current market cap on LK stock hovers in the $4 to $5 billion range.Consequently, long-term upside potential in Luckin Coffee stock is quite compelling. The China Coffee Market Will Be HugeFrom a growth perspective, the China economy is second to none on the global stage. This is a massive economy, with well over a billion people, the majority of whom are urbanizing and digitizing at an exceptional pace. The net result is that the economy is rapidly expanding, led mostly by robust growth in the consumer economy.One part of this consumer economy that is particularly strong is the retail coffee market. Consumer expenditures and retail sales in China are rising at a healthy high single-digit rate. But, the coffee market in China is growing much more quickly, averaging roughly 20% growth on an annual basis. * 10 Baby Boomer Stocks to Buy Still, China coffee consumption per capita is low. Chinese consumers drink about three cups of coffee per year. U.S. consumers drink about 360 cups of coffee per year. That is a hundred-fold difference. To be sure, China GDP per capita and household expenditures per capita are about one-tenth the size of U.S. GDP and expenditures per capita. That explains some of the divergence. But, only about 10% of it.Thus, the Chinese coffee market is growing very quickly, and has plenty of room to keep growing at 15-20% pace over the next several years. Luckin Coffee Will Be An Important PlayerAt the current moment, Luckin Coffee is a relatively small player in the Chinese coffee marketplace. They only operate about 2,400 stores, out of 100,000 coffee houses in China.But, eighteen months ago, that number stood at zero. Thus, over the past 18 months, Luckin has opened over 2,000 coffee stores, making this company the fastest growing player in the China coffee market.This robust store opening rate will continue. Luckin Coffee operates on a unique model. They focus on smaller stores, which don't have much seating area and are focused simply on serving coffee so that consumers are in-and-out. To complement these quick-service-style stores, Luckin has built out a robust online and mobile ordering channel so that consumers can order ahead, run into the store, pick up the coffee and get out quickly. All the while, Luckin offers coffee at industry low prices.In other words, Luckin is doing the two things it needs to do most: minimize cost and maximize convenience. Because they are doing this, Luckin will inevitably transform into a very important player in the China coffee marketplace.How important? It's easy to see this company being as big as Starbucks in the Chinese marketplace. Starbucks has nearly 4,000 stores in China today, and plans to grow that to base 6,000 over the next few years. Luckin consequently has a realistic and visible runway to 6,000-plus stores over the next several years. This Could Be A $10 Billion-Plus Company One DayGiven the company's favorable long-term growth prospects, there is an opportunity for Luckin Coffee to one day turn into a $10 billion-plus company.Here's the math. Starbucks company-operated stores on a global basis do about $1.3 million in sales per store. Luckin probably won't be able to do that, given lower China expenditures per capita and their smaller stores. But, about $1 million in sales per store seems doable. On a 6,000 store base, that implies $6 billion in revenues at scale. * 7 A-Rated Healthcare Stocks for Industry Expansion Starbucks operates at ~20% operating margins. But, that's a blended model of licensed and company-operated stores. Luckin's model is completely company-operated. Luckin also has less scale to lever expenses. That combo broadly implies that ~10% operating margins are doable at scale, which implies roughly $600 million in operating profits. Taking out 25% for taxes, that yields $450 million in net profits.Based on a Starbucks' five-year average forward earnings multiple of 25, that equates to a long run market cap target of over $11 billion. Lucking Coffee stock has a market cap of between $4 and $5 billion. Bottom Line on LK StockThe Luckin Coffee IPO was a huge success because Luckin Coffee stock has tremendous long-term growth potential. At scale, this long-term growth potential implies that LK stock could more than double from current levels over the long run. As such, for long-term investors, Luckin Coffee stock is the type of stock you want to buy into on weakness.As of this writing, Luke Lango did not hold a position in any of the aforementioned securities, but may initiate a long position in LK within the next 72 hours. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 High-Yield REITs to Buy (Even When the Market Tanks) * 5 Great Blue-Chip Stocks to Buy Today * 7 Tech Stocks to Buy That Are Also Perfect for Retirement Compare Brokers The post Why Luckin Coffee Stock Could Be A Big Winner appeared first on InvestorPlace.
rose sharply in its trading debut Friday on Nasdaq, well above the initial public offering price of $17. During trading Friday, the stock jumped 25.1% to $21.27 -- with the first trade for Luckin Coffee at $25 -- and then it closed up nearly 20% at $20.38. Established in 2017 and dubbed the "Starbucks of China," Luckin is the second-biggest coffee chain in China after Starbucks.
China's homegrown coffee chain Luckin Coffee is seeking help from the U.S. capital markets in its quest to overtake Starbucks.
Joining Yahoo Finance's Jen Rogers and Myles Udland is Brian Shannon, CMT and founder of www.alphatrends.net. It's been exactly four weeks since Luckin's IPO and the charts are looking bullish. Amazon is showing strength as well.