Luckin Good: Analysts See ‘Lots Of Growth’ For Starbucks Of China
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MICHAEL LARKIN
6/11/2019
Starbucks‘ (SBUX) Chinese rival Luckin Coffee (LK) got a caffeine boost after Wall Street analysts made upbeat predictions about the coffee shop company as they initiated coverage. But Luckin Coffee stock fell Tuesday in continued volatile post-IPO trading
KeyBanc Capital Markets analyst Eric Gonzalez gave Luckin Coffee an overweight rating with a price target of 22. He said there is “lots of growth potential,” and that it offers high quality, affordability, and convenience in a “no-frills atmosphere.”
“Luckin Coffee’s rapid ascent toward becoming one of China’s largest consumer brands has attracted its fair share of skeptics. However, we believe the company has several strategic advantages that should support its transition into a profitable business,” Gonzalez said in a research note. “These include: 1) exposure to a rapidly evolving coffee culture in China; 2) limited direct competition; 3) low development costs; 4) better tech and data analytics than peers; and 5) low per-unit cost structure.”
Needham also initiated Luckin Coffee stock with a buy rating, and gave it an even more optimistic target of 27. The firm said Luckin is the only local brand with “strong national exposure” and touted the fact it could offer good coffee at cut-down prices.
“By utilizing its new technology-driven retail model and providing high-quality coffee products, affordability, and convenience to customers, we believe Luckin is disrupting the coffee industry in China,” the firm said in a research note, according to CNBC. “Considering the rapid growth of China’s coffee market and transition from instant coffee to freshly brewed, Luckin is servicing and gaining market share from an undeserved mass market. Its technology and innovative business model allow it to have a lower cost per cup of coffee than other premium brands in China.”
Morgan Stanley also initiated coverage, but took a more conservative stance. It has given it an equal-weight rating with a 21 target.
Jermaine Filmore
Jermaine Filmore 