Price Crosses Moving Average
|Bid||0.00 x 800|
|Ask||0.00 x 900|
|Day's Range||64.41 - 68.31|
|52 Week Range||50.02 - 99.72|
|Beta (5Y Monthly)||0.72|
|PE Ratio (TTM)||22.20|
|Earnings Date||Apr 27, 2020|
|Forward Dividend & Yield||1.64 (2.60%)|
|Ex-Dividend Date||Feb 04, 2020|
|1y Target Est||80.52|
Shake Shack CEO Randy Garutti talks with Yahoo Finance about the state of the restaurant industry during the height of the coronavirus pandemic.
Chinese coffee chain super-brand Luckin Coffee has been in the spotlight the past week after the company revealed in an SEC filing that it has undertaken an internal investigation into an alleged $300 million fraud on the part of its former COO. The stock is down another 15% today as investors continue to comprehend the company’s disclosure and its positioning in the competitive Chinese coffee market, where the company displaced Starbucks as the retail and delivery leader in just a few short years. On Monday, Goldman Sachs Group Inc. said a group of lenders is putting 76.3 million of Luckin’s American depositary shares up for sale, after an entity controlled by Luckin Chairman Charles Zhengyao Lu defaulted on the terms of a $518 million margin loan.
Bill Ackman, the Pershing Square fund manager who turned $27 million into $2.6 billion after a series of bets using credit-default swaps in February, tweeted messages on his newfound optimism. Other factors that made Ackman optimistic include the prospect of hydroxychloroquine and antibiotics as treatments, the scaling up of antibody tests, massive government stimulus and low interest rates.
Starbucks Corporation (SBUX) is better positioned than most rivals to survive and prosper once the coronavirus pandemic runs its course. Many stores in China have reopened, giving the company a steady income stream while U.S. and European stores without drive-thru or delivery capacity have closed. It's likely that revenues at coffee houses that are still open have taken a big hit due to dependence on rush-hour traffic that has trickled to a standstill in many cities and towns.
The former Starbucks CEO seeded the fund with $2 million from the Schultz Family Foundation and $2 million from other donors.
Luckin Coffee Inc said on Sunday it will maintain normal operations at its stores and apologised to the public, days after it announced an internal investigation had shown its chief operating officer and other employees fabricated sales deals. Shares of Luckin, which competes in China with Starbucks Corp, sank as much as 81% on Thursday in New York after it said the investigation had found that fabricated sales from the second quarter of 2019 to the fourth were about 2.2 billion yuan ($310 million). "Regarding the suspected financial fraud and the extremely bad impact it has caused, Luckin Coffee hereby sincerely apologizes to the public," the company said in a post on its official Weibo account.
Luckin Coffee (NASDAQ:LK) stock tanked more than 80% (and is down 66% at the time of this writing) after the company revealed an investigation that essentially proved what Muddy Waters alleged months ago. Luckin Coffee admitted to inflating its sales numbers after an internal investigation. Luckin Coffee reveals investigation In a press release filed with […]
From guaranteeing hours to full pay replacement, companies are stepping up to help workers impacted by the coronavirus shutdown.
The company that holds the franchise for Starbucks in Chile has suspended the contracts of 90% of its employees in the country, where most cafes are shut as part of efforts to fight the coronavirus epidemic, local media and a union said on Friday. Mexico's Grupo Alsea said it would honor March salaries and pay Chilean Starbucks workers a spot payment equivalent to 10% of their base salaries in April, according to a statement sent to Reuters. The company said it had made the decision after a new law came into force in Chile that allowed companies to suspend labor contracts during the health crisis and for their workers to receive a limited unemployment benefit with the expectation of their jobs being revived once normal working conditions are restored across the country.
After reaching $230, Alibaba (NYSE:BABA) stock quickly dropped to $176 on fears of the coronavirus from China. But during the past week or so, things have been looking much better for Alibaba. Note that the shares have since bounced back to $189, putting its market capitalization at roughly $500 billion.Source: Kevin Chen Photography / Shutterstock.com It seems likely that China has not been forthcoming with its infection and death rates. But it does look like the government has been able to flatten the curve of coronavirus patients because of the draconian actions it took in the country's Hubei province.The result is that China's massive economy is starting to come back online. Its manufacturing purchasing managers index spiked to 52 in March, up from 35.7 in February. It is also notable that companies like Nike (NYSE:NKE), Starbucks (NASDAQ:SBUX) and Apple (NASDAQ:AAPL) have been reopening their stores in China.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSo what about Alibaba stock? Is it a buy now? I think it is. Here are three reasons why I hold that view. E-CommerceIn the fourth quarter, Alibaba's revenues jumped by an impressive 38% to $23.2 billion, and its operating cash flows came in at $13.9 billion. In Q1, the company's growth may have stayed resilient. With brick-and-mortar stores shut down, there was little choice for consumers but to make e-commerce purchases. * 7 Telecom Stocks That Are Worth a Close Look We already got a glimpse of that phenomenon from Nike's results. In its last reported quarter, the company 's online sales in China offset most of the steep sales declines of its retail outlets in the country.Alibaba is China's dominant e-commerce platform. The number of active consumers on the company's marketplaces came to a staggering 711 million last year.It's also important to note that China's government has implemented aggressive monetary and fiscal policies. These policies should boost the e-commerce spending of the country's consumers.Then there are the long-term drivers of BABA stock. For example, the number of middle class citizens in China is expected to reach 600 million by 2022, and its e-commerce market is expected to be worth $839.54 billion by 2021. The CloudThe coronavirus is likely to be a catalyst for Alibaba's cloud business. After all, the technology allows for collaboration by and the monitoring of remote workforces. But it is also essential for allowing companies to leverage e-commerce when their own brick-and-mortar operations are closed.Consider that - in just a few years - Alibaba has built a large cloud business, which has benefited from the company's large ecosystem of partners as well as innovations like artificial intelligence. And the unit's growth has been particularly strong. In the company's last reported quarter, its revenue soared 62% to $1.5 billion.Showing the strength of the company's cloud platform, during the 11.11 Global Festival, the technology actually processed about 544,000 orders per second at peak levels and handled about 970 petabytes of data. The Valuation of BABA StockThe valuation of the shares is reasonable. Keep in mind that the forward price-earnings ratio of the shares is about 23. To put that into perspective, Amazon.com's (NASDAQ:AMZN) forward P/E ratio is about 66.As for Wall Street analysts, they remain upbeat on Alibaba stock, too, as they, on average, expect the company's revenue to rise about 32% this year. But that may be too conservative, especially since China has been able to get back on track quickly, while the company is the dominant player in non-cyclical growth markets like e-commerce and cloud computing.Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 25 Stocks You Should Sell Immediately * 1 Under-the-Radar 5G Stock to Buy Now * This Stock Picker's Latest Video Just Went Viral * The 1 Stock All Retirees Must Own The post 3 Reasons to Be Bullish on Alibaba Stock appeared first on InvestorPlace.
Starbucks (NASDAQ:SBUX) stock caught a break when Luckin Coffee (NASDAQ:LK), which claimed to be its Chinese nightmare, turned out to be a fraud.Source: Natee Meepian / Shutterstock.com Until the fraud was discovered, Luckin Coffee had everyone fooled. It had me fooled, although I wasn't recommending you buy it.If Starbucks had ever been a direct competitor to Luckin, it might be in better shape. Luckin was basically Starbucks take-out and delivery.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut Starbucks never was a direct competitor to Luckin. As I wrote last month "Starbucks sells coffee as a luxury good." The couches, the Wi-Fi, the soothing music, they're all part of the thing. Even if you just grab-and-go, you know they're there. It's what you pay for.That is Starbucks' real problem. Getting Past the VirusUnless it gets new capital in some form, SBUX stock is facing an existential threat from the novel coronavirus.At the end of December, Starbucks had $3 billion in cash. It cost $5 billion to run the business for those three months. When Starbucks next reports revenue it won't be close to last quarter's $7 billion. Remember, the March quarter saw the heart of the disaster in China, its second-largest market. * 7 Dividend Stocks at Risk of Slashing Payouts The June quarter is going to be even worse. China will be coming back online. But it may be some time before Chinese consumers are comfortable lounging together. It will certainly take time for them to start spending $4.80 for a cup of coffee again.For now, Starbucks is doing everything it can to be a good citizen. It's paying people into May whether they show up or not. It's giving coffee to first responders. Its employees are making masks.But it's clear America's response to the virus is nothing like China's was. The "lessons" CEO Kevin Johnson says he learned from China may not apply here. We may be in for a much longer shutdown.For that reason I find the idea of buying Starbucks after its 3% Luckin "relief rally" ridiculous. Employees are already asking it to close stores completely, admitting that coffee "is not essential."That may be true for coffee bought by the drink in a store. But take it from this freelance journalist, coffee is still essential.Thereby hangs a tail. A Nestle Bailout?If things get very tight, and I think they will, there may be a way out for Starbucks.Starbucks sold its packaged coffee business to Nestle (OTCMKTS:NSRGY) in 2018. At the time it was considered a masterstroke. The $7.2 billion went back into opening stores.The only product sales from which Starbucks gets a retail profit now are those made in its stores. On others it gets the equivalent of a royalty. Thanks to Starbucks, Nestle also has an easy path to pushing its Nespresso coffee machines on Chinese businesses. Those machines might be stocked with Starbucks-branded pods, but they also reduce in-store sales.This does not make SBUX stock a buy, except perhaps for Nestle. Nestle has a $307 billion market capitalization and is doing well enough to keep up its dividend. As of April 3, Starbucks had a market cap of $74 billion. If a lifeline is needed, there may be one there. But the depth of the problem will have to become clear to investors before it's offered. The Bottom Line on SBUX StockStarbucks is in triage mode right now. It is trying to save its reputation.This is a good thing. But it may not be enough to survive as a stand-alone company. It's certainly not worth $74 billion.If I were a short-seller, and I'm not, I might consider buying puts on SBUX stock here.Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O'Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story. More From InvestorPlace * 25 Stocks You Should Sell Immediately * 1 Under-the-Radar 5G Stock to Buy Now * This Stock Picker's Latest Video Just Went Viral * The 1 Stock All Retirees Must Own The post Starbucks Stock Catches a Luckin Break, But Its Future Is Bleak appeared first on InvestorPlace.
Luckin Coffee announced an investigation into corporate staff and others following allegations of financial misconduct.
As the COVID-19 pandemic continues to affect our daily lives and the U.S. economy, investors are wondering if they should buy into shares of restaurant stocks in the second quarter. Year-to-date McDonald's (NYSE:MCD) stock is down about 18.2%.Source: 8th.creator / Shutterstock.com That decline compares to a 25% drop in the Consumer Discretionary Select Sector SPDR Fund (NYSEArca:XLY), which includes MCD as its third-largest holding at 7.39% of the portfolio, behind Amazon (NSADAQ:AMZN) at a whopping 24.1% and Home Depot (NYSE:HD) at 12% of the exchange-traded fund's assets.Despite the recent rapid decline, I expect the short-term volatility in MCD stock to continue. However, those investors with a two-to-three-year horizon may consider further dips as opportunity to buy into the shares.InvestorPlace - Stock Market News, Stock Advice & Trading Tips How the Pandemic is Affecting the Golden Arches GloballyMcDonald has more than 38,000 restaurants in over 100 countries. Its largest segment is the U.S.Next is its International Lead Markets segment, i.e., established markets including Australia, Canada, France, Germany and the U.K. And then comes its High Growth Markets, including China, Italy, Korea, the Netherlands, Poland, Russia, Spain and Switzerland.In recent weeks, the group has closed all play areas and many of its dine-in sections in the U.S. It has also simplified its menu offerings. * 7 Small-Cap Stocks That Might Not Survive Management is also likely to offer some franchisees rent deferrals. About 90% of the restaurants are currently franchised. As these franchisees carry the operating costs and business risks, McDonald's does not have to worry about the expenses of running those operations.Even more importantly, the group collects rent from the franchisees as the company owns most of the properties where the restaurants operate. It leases those out to the franchisees, often at significant markups. It may not be wrong to say that the company is in real estate business as much as food services. Therefore rent deferrals would likely affect McDonald's earnings.At present much of Europe is under a lockdown. And many businesses have either been ordered to shut down or have themselves decided to cease operations for now.For example, as of March 23, all McDonald's stores in the U.K. and Republic of Ireland have been closed indefinitely. Similar closures are also continuing in France, Italy and Spain. And in late January management had closed hundreds of stores in China, where the novel coronavirus had initially started. What to Expect from Q1 EarningsThe company is likely to announce Q1 results in late April.Its Q4 earnings, released in January, topped analysts' estimates. Quarterly revenue $5.3 billion fueled earnings per share of $1.97. Earnings got a boost from price hikes.U.S. same-store sales climbed 5.1% during Q4, despite traffic to restaurants falling by 1.9% in 2019. The company also reported global same-store sales growth of 5.9%.Overall, the results showed that the group is a consistent performer. It is also a profitable business with strong cash flows.But then came March when we started seeing the novel coronavirus become a global pandemic. And on March 17, MCD management said that it would not yet be able to fully assess the impact of the viral outbreak. McDonald's operates in the fragmented food service industry, which includes competitors like Restaurant Brands International (NYSE:QSR), Starbucks (NASDAQ:SBUX) and Yum Brands (NYSE:YUM).And shares of McDonald's as well as its peers have been suffering in recent weeks. In March alone, both MCD and SBUX were down 15% while QSR and YUM shares were down about 28% and 23%, respectively.Given the uncertainty not just in the U.S., but also in other countries, many investors are understandably quite anxious to analyze MCD stock's quarterly results in several weeks. Recent Price Action of MCD StockOn Aug. 9, 2019, MCD stock price saw an all-time high of $221.93. And on March 18, 2020 came the 52-week low of $124.23. The shares are now hovering around $162.Over the past year, the shares are down about 12%. If you're an investor who also pays attention to technical charts, you may be interested to know that the recent price action means that it'll likely take time for McDonald's stock price to settle. It'd need to build a base before a new sustained up move could start.In the coming weeks, I expect it to trade mostly between $150 and $175. The price may become even choppier around the earnings release date.If you currently hold MCD stock, depending on your risk/return profile, you may want to ride out the short-term volatility. * 30 Stocks on a Deathwatch Alternatively, if you're experienced with options, you may want to initiate a covered call position. For example, a May 15-expiry ATM call would provide some protection in case McDonald's stock falls further. It's also enable you to participate in a potential up move between now and mid-May.Recent research by Sandip Dutta and Vignesh Prabhu of Clemson University on company stock prices in times of recession and recovery highlights that a "franchised company like MCD shows … resilience and holds the stock price steady even in the average market meltdown."If history is any guide, McDonald's shares should be able to weather a prolonged downturn in the economy better than many other stocks. Investor Takeaway on MCD StockIt'd be no exaggeration to say that we're living in unprecedented times. And in recent weeks, share prices of most stocks, including the usual investor darlings like McDonald's, have been falling hard and fast.Your guess may indeed be as good as any other as to when most stocks will likely hit the bottom in 2020. Nonetheless, if you liked a company for solid fundamental reasons before its price went down double digits, then you should possibly like it even more now.Although there might still be some more short-term pain in MCD stock, long-term investors may consider buying the dip in McDonald's shares. I find the stock price attractive as it falls toward $150. Shareholders would also be entitled to the current dividend yield of about 3.1%.Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities. More From InvestorPlace * 25 Stocks You Should Sell Immediately * 1 Under-the-Radar 5G Stock to Buy Now * This Stock Picker's Latest Video Just Went Viral * The 1 Stock All Retirees Must Own The post With Traffic Down and Stores Closed, is it Time to Buy McDonald's Stock? appeared first on InvestorPlace.
(Bloomberg Opinion) -- Investors in Luckin Coffee Inc., China’s upstart rival to Starbucks Corp., should have seen this coming.Luckin shares plunged as much as 81% in U.S. trading Thursday after the country’s largest coffee chain said employees fabricated much of its sales last year. Car Inc., which shares a chairman with Luckin, tumbled as much as 72% in Hong Kong on Friday morning before trading was halted.Skepticism swirled around the sustainability of Luckin’s business model well before its Nasdaq initial public offering last May. Luckin’s success relied heavily on generous discounts funded by investor money, as I wrote in December 2018. The company spent 152 yuan ($21.45) for every 100 yuan it made selling coffee, my colleague Tim Culpan noted in May. In February, after short seller Muddy Waters Capital said it had received an 89-page anonymous report alleging that Luckin fabricated financial and operating numbers, we again noted its reliance on near-permanent discounts.Investors in the chain include Singapore’s sovereign wealth fund, GIC Pte, U.S. fund manager BlackRock Inc. and crop trading giant Louis Dreyfus Co., as well as a slew of venture capital firms. Early backers included Centurium Capital, a private equity fund founded by the former China head of Warburg Pincus.Luckin’s turbo-charged growth and technology sheen were central to the investor buzz it created. Having opened its first store in Beijing only three years ago, the company had 4,500 domestic locations by the end of last year, outstripping Starbucks’ 4,300 Chinese stores.The company described itself as a coffee “network” in its IPO document and prided itself on an app that offers a “100% cashier-less environment.” That slapped a new-economy aura on a largely humdrum and routine business — not unlike the office-sharing company WeWork, another hot unicorn that subsequently fell from grace.Luckin said Chief Operating Officer Jian Liu and employees reporting to him engaged in misconduct and it is investigating. The aggregate sales amount associated with the fabricated transactions totaled about 2.2 billion yuan. Certain costs and expenses were also substantially inflated, according to the filing. Liu and others have been suspended and investors shouldn’t rely on previous financial statements for the nine months ended Sept. 30, the company said. Luckin reported net revenue of 2.9 billion yuan for the nine months through September.It’s a moment of truth and a wake-up call for investors who pile into Chinese startups that show meteoric growth rates. That’s a message that few appear to have taken to heart after the spectacular boom and bust of bike-sharing companies such as Ofo. WeWork’s failed attempt to list taught U.S. investors that you can’t burn cash forever. Luckin could deliver a similar lesson for China.Luckin’s management will need a long time to re-establish investor trust, if it can do so at all. The market for Chinese IPOs in the U.S. is also sure to suffer. After all, it’s far from the first time that an overseas-listed Chinese company has been embroiled in allegations of accounting manipulation. Luckin at least can be thankful that it raised $778 million selling shares and convertible bonds earlier this year, giving it some leeway to ride out the storm. For investors, the moral is an old one: If something looks too good to be true, it probably is. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Wild price swings have kept Starbucks Corp.’s darling arabica coffee in the spotlight recently. But its bitter-tasting cousin is likely to be a winner as the coronavirus fuels more home drinking.As coffee shops from London to Seattle shut down, shoppers are rushing to supermarkets to stockpile their favorite java. And that’s where robusta beans come into play. While many coffee shops pride themselves in serving the highest-quality arabica beans, the coffee consumed at home usually has a higher content of the cheaper robusta variety.There’s also the potential for supply disruptions as the virus spreads to the emerging markets where robusta is produced and favored for local consumption. Take the case of Vietnam. The top robusta grower ordered a 15-day lockdown and traders fearing shipping disturbances helped send futures up more than 3% Thursday. That could be the start of a turnaround for futures that have lagged arabica’s gains.“Stockpiling has been a feature of daily life in much of western Europe and parts of the U.S. for the last few weeks,” said Carlos Mera, analyst at Rabobank International in London. “As the virus expands on a similar exponential path in developing countries, we would expect to see consumers stockpiling coffees that have a higher proportion of robusta.”For an idea of the impact lockdowns are having in the coffee market, look no further than grocery stores. Coffee sales volume at American retailers jumped 31% in the four weeks ended March 22 from the same period a year earlier, according to data from Chicago-based market researcher IRI. In U.K., sales in supermarkets surged by 30% in the week ended March 14, the biggest increase in at least three years, data from analytics firm Nielsen showed.Americans consumed 7.6% more at home in the first quarter, while restaurant demand slumped 14%, said Samuel Nahmias, president of researcher StudyLogic. Consumers are for the first time in years drinking more instant and traditional coffee types, which have a higher robusta content.A similar move could soon happen in emerging markets of Southeast Asia, Latin America and Africa. Brazil and Indonesia are also key producers and consumers of robusta beans. In countries where tea is the favorite drink at home and coffee is usually consumed mainly at shops, overall demand is likely to suffer.“Most Africans and Asians do not have fancy espresso machines or even drip coffee makers,” so at home they drink instant, said Judy Ganes, the president of J. Ganes Consulting, who has studied the markets for more than three decades. “When coffee shops close that serve arabica and people must drink coffee at home, it will be mainly robusta beans.”While arabica futures have gained in recent months as supplies dwindle, robusta lagged behind. That’s widened the price gap between the two grades, boosting the incentive for roasters to increase the share of the bitter beans in their blends.The rise in robusta demand could push prices up by about 16% to $1,400 a metric ton in the coming four weeks, according to Mera of Rabobank.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Luckin Coffee plunged after the firm admitted Thursday it's investigating "fabricated sales" that could total more than $300 million.
Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.As is so often the case in the markets, bad news for one company can be good news for another. An excellent example of this dynamic is the contrasting price action in the shares Thursday of Luckin Coffee (NASDAQ: LK) and Starbucks Corp (NASDAQ: SBUX). Bad New Is Bad News, And Accounting Issues Are Horrible News Before the open, Luckin Coffee said its COO "fabricated transactions" to boost the company's sales and withdrew all previous financial statements over the past year. Wall Street can be forgiving on some issues, but when it comes to accounting fraud, it shows no mercy.As expected shares, of Luckin Coffee shares were slaughtered in premarket trading, but recovered some of the losses in the regular session.Nothing But Sellers Before the shocking announcement was made, shares of Luckin were trading in the $22.50 area. Within 30 minutes, it swooned to $3.74, far beyond its former all-time low of $13.71 from last May. By the opening bell, it had recovered to $4.90.Nothing But Buyers The huge windfall in profits for the shorts and the potential of a profitable long attracted huge buyers in the first 45 minutes of the session. In a straight-up fashion, the issue raced to $10.58 before falling back to $7 area. At the time of publication, Luckin shares were down 74.89% at $6.58. Good News For Starbucks It does not take long for savvy traders, investors and algorithms to figure out that if Luckin Coffee goes away, it will be good news for its competitors, mainly Starbucks.Starbucks opened up nearly $3 higher from its $62.62 close and spiked to $68.70. After peaking at that level, it has continued to make new lows for the session. At the time of publication, Starbucks shares were up 1.63% at $63.64.Starbucks Moving Forward The struggles of a competitor have bullish implications for Starbucks. But there is still a huge negative force looming for Starbucks, its competitors and others in the restaurant sector: COVID-19. At this time, the company is bleeding cash, with many of its locations closed and the ones that are still open experiencing much slower business. We have no idea how long the closures will last at this point in the crisis.And with a recession -- or depression -- looming, will the luxury of a $5 cup of coffee become a thing of the past? See more from Benzinga * PreMarket Prep Stock Of The Day: Kroger * PreMarket Prep Stock Of The Day: Restoration Hardware * PreMarket Prep Stock Of The Day: Abbott Labs(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
(Bloomberg) -- Luckin Coffee Inc., the fast-growing Chinese coffee chain, plunged as much as 81% on Thursday after the company said its board is investigating reports that senior executives and employees fabricated transactions.The company’s announcement that Chief Operating Officer Jian Liu and employees reporting to him engaged in misconduct casts doubt on the foundations of the Chinese coffee chain’s meteoric rise and its emergence as a key competitor to Starbucks Corp.The chain is aiming to reach 10,000 locations by the end of 2021 -- a goal that may now be unattainable. Thursday’s share decline erased what had been a 54% gain since the company went public last year.Liu and others have been suspended and investors shouldn’t rely on previous financial statements for the nine months ended Sept. 30, the company said. The transactions in question occurred last year and totaled about 2.2 billion yuan ($310 million), according to the filing.Keybanc Capital Markets analyst Eric Gonzalez said that earnings visibility may be limited “for the foreseeable future.” In a note to clients, he added “it will take several years for management to repair its credibility.”If true, the fabricated sales figure could represent a significant portion of the company’s total revenue. Luckin, which has only reported financial data for the second and third quarter of last year after its May public offering, was seen reporting 5.15 billion yuan of revenue for the full year, according to the average of estimates compiled by Bloomberg.‘Substantially Inflated’“Certain costs and expenses were also substantially inflated by fabricated transactions during this period,” Luckin said, while noting the special board committee investigating the matter hasn’t independently verified the fabricated sales figure.The coffee chain, founded in 2017, operated about 4,500 stores by the end of 2019 in China. Chairman Lu Zhengyao and Chief Executive Officer Qian Zhiya have employed a strategy they used with CAR Inc. -- a vehicle rental business -- more than a decade ago: burning money from investors to quickly grab market share from rivals. That strategy has been successful in winning over investors.Trouble emerged earlier this year, however. The shares plunged after Muddy Waters tweeted on Jan. 31 that it had a short on the stock after receiving what it called a “credible” unattributed 89-page report that alleged accounting issues with the chain and a broken business model. Luckin Coffee denied the allegations.The Xiamen, China-based company raised $778 million from a share sale and a convertible bond offering in early January, according to people with knowledge of the matter. The company also raised $645 million in its U.S. IPO. Despite the allegations and mandatory closures related to the outbreak of coronavirus, analysts have largely remained optimistic about Luckin. Prior to Thursday’s disclosure, six had a buy recommendation on the stock, compared to one hold and zero sell recommendations.Breaking EvenIn November, Luckin reported revenue that was six times the year-earlier total. The company, which has reported losses as it engages in a strategy that prioritizes rapid growth, said it was on track to start breaking even at the corporate level in the third quarter of this year.China is becoming an important market for coffee retailers as the traditionally tea-drinking nation develops a taste for java. With its growth potential, it’s been identified by Starbucks as one of the company’s two key markets, along with the U.S. But Luckin had Starbucks’ expansion there clearly in its sights.“We expect to take over Starbucks as the No. 1 coffee player in China by the end of this year in number of stores,” Chief Financial Officer Reinout Schakel said at the time. “We have a very strong brand.”(Updates throughout, including share performance since IPO, company history. and analyst comment.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Its board alleged that a top executive fabricated millions of dollars worth of transactions last year—essentially rendering financial statements and guidance for 2019 unreliable.
Shares plummet 80% for China’s coffee giant Luckin Coffee after an investigation found that the company’s COO fabricated sales. Yahoo Finance’s On The Move panel discusses.