Luckin Coffee (LKNCY) AI Stock Analysis

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Luckin Coffee

(OTC:LKNCY)

80Outperform

Luckin Coffee's overall stock score is driven by strong financial performance, significant growth in revenue and store expansion, and effective management strategies. While valuation is moderate, the focus on growth and strategic measures to counter challenges like rising input costs support a positive outlook. Technical indicators suggest upward momentum, though the absence of detailed momentum metrics introduces some caution.

Positive Factors

Customer Loyalty

The stickiness of customers is improving, as the monthly sales per transacting customer continued to grow, indicating strong customer loyalty.

Market Position

Luckin Coffee is the largest and fastest-growing coffee brand in China, with a remarkable market share of 21.7% in the chained cafe segment.

Negative Factors

Cost Management

Luckin’s ability to cope with costs inflation has not been fully appreciated by all investors, which may serve as a share price catalyst in the future.

Luckin Coffee (LKNCY) vs. S&P 500 (SPY)

Market Cap

$9.08B

Dividend YieldN/A

Average Volume (3M)3.04M

Price to Earnings (P/E)25.0

Beta (1Y)0.36

Revenue Growth36.78%

EPS Growth0.76%

CountryUS

Employees33,795

SectorConsumer Cyclical

Sector Strength63

IndustryRestaurants

Share Statistics

EPS (TTM)1.28

Shares Outstanding266,231,500

10 Day Avg. Volume2,661,033

30 Day Avg. Volume3,044,387

Financial Highlights & Ratios

PEG Ratio32.78

Price to Book (P/B)N/A

Price to Sales (P/S)5.04

Price to Cash Flow (P/CF)N/A

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$38.51

Price Target Upside20.31% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

Luckin Coffee Business Overview & Revenue Model

Company DescriptionLuckin Coffee Inc. engages in the retail services of freshly brewed coffee and non-coffee drinks in the People's Republic of China. It also offers hot and iced freshly brewed coffee, such as Americano, Latte, Cappuccino, Macchiato, Flat White, and Mocha, as well as specialty coffee based on market and seasonal trends; coconut milk latte products; tea drinks; pre-made beverages; and pre-made food items, such as pastries, sandwiches, and snacks. In addition, the company offers cups, tote bags, and other merchandises. It operates pick-up stores, relax stores, and delivery kitchens under the Luckin brand, as well as Luckin mobile app, Weixin mini-program, and other third-party platforms for third-party payment channels. Further, the company provides technical and consultation services; and manufactures materials for products. As of December 31, 2021, it operated 4,397 self-operated stores; 1,627 partnership stores; and 1,102 Luckin Coffee EXPRESS machines. Luckin Coffee Inc. was incorporated in 2017 and is headquartered in Xiamen, the People's Republic of China.

How the Company Makes MoneyLuckin Coffee makes money through the sale of coffee, tea, and other beverages, along with a selection of light meals and snacks. The company's revenue model is primarily driven by its extensive network of self-operated stores and pick-up stores where customers can order and collect their drinks. Additionally, Luckin Coffee leverages its mobile app to facilitate orders and payments, enhancing customer convenience and streamlining operations. The company also generates revenue through partnerships with third-party delivery services to reach a wider audience beyond their physical stores. Strategic partnerships, promotional deals, and technology integration are significant factors contributing to its earnings by increasing customer engagement and optimizing operational efficiency.

Luckin Coffee Financial Statement Overview

Summary

Luckin Coffee demonstrates strong revenue growth and profitability, with a notable 28.19% increase in revenue. However, challenges such as increased operational costs affecting margins and negative free cash flow are present. The balance sheet is robust with moderate leverage, suggesting financial stability. Continued focus on cash flow management will be crucial to sustain growth.

Income Statement

Very Positive

Luckin Coffee's income statement shows a strong performance in the TTM (Trailing-Twelve-Months) with a gross profit margin of 29.57% and a net profit margin of 7.47%. Revenue growth is impressive at 28.19% from the previous year, indicating robust sales growth. However, there is a slight decrease in EBIT and EBITDA margins compared to the previous year, which may suggest increasing operational costs.

Balance Sheet

Positive

The balance sheet reflects a healthy equity ratio of 47.5%, indicating a well-capitalized company. The debt-to-equity ratio is 0.55, showing moderate leverage and prudent financial management. Return on equity stands at 22.73%, showcasing strong profitability relative to shareholder investment. However, the increase in total debt is a point of concern.

Cash Flow

Positive

Cash flow analysis reveals a challenging situation with negative free cash flow in the TTM period, indicating cash outflows exceeding inflows from operations. Free cash flow growth rate is negative due to increased capital expenditures. The operating cash flow to net income ratio is 0.70, which is relatively strong, but the free cash flow to net income ratio is negative, highlighting the need for improved cash management.

TTM	Dec 2023	Dec 2022	Dec 2021	Dec 2020	Dec 2019
Breakdown
Income Statement		Total Revenue
31.93B	24.90B	13.29B	7.97B	4.03B	3.02B
	Gross Profit
9.44B	14.01B	5.28B	2.73B	311.42M	-195.51M
	EBIT
2.76B	3.03B	1.60B	-92.39M	-2.04B	-3.21B
	EBITDA
3.95B	5.11B	2.40B	1.69B	-5.55B	-2.72B
	Net Income Common Stockholders
2.39B	2.85B	488.25M	578.54M	-5.60B	-3.16B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
219.10M	3.49B	3.53B	6.48B	5.06B	5.37B
	Total Assets
0.00	18.29B	10.48B	12.31B	9.32B	9.76B
	Total Debt
0.00	4.97B	1.91B	4.10B	3.00B	678.70M
	Net Debt
219.10M	2.04B	-1.63B	-2.37B	-1.80B	-4.19B
	Total Liabilities
0.00	10.16B	5.43B	8.68B	6.60B	4.62B
	Stockholders Equity
-51.37M	8.14B	5.05B	3.63B	2.66B	5.06B
Cash Flow		Free Cash Flow
-1.08B	143.73M	-781.20M	-49.77M	-3.20B	-3.78B
	Operating Cash Flow
1.67B	2.90B	19.82M	123.45M	-2.38B	-2.17B
	Investing Cash Flow
-2.27B	-3.45B	-798.05M	337.00K	-1.71B	-1.82B
	Financing Cash Flow
300.00M	0.00	-2.28B	1.51B	4.03B	7.24B

Luckin Coffee Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price32.01

Price Trends

50DMA

30.99

Positive

100DMA

27.58

Positive

200DMA

24.74

Positive

Market Momentum

MACD

1.40

Negative

RSI

62.90

Neutral

STOCH

66.46

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LKNCY, the sentiment is Neutral. The current price of 32.01 is below the 20-day moving average (MA) of 33.70, above the 50-day MA of 30.99, and above the 200-day MA of 24.74, indicating a neutral trend. The MACD of 1.40 indicates Negative momentum. The RSI at 62.90 is Neutral, neither overbought nor oversold. The STOCH value of 66.46 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for LKNCY.

Luckin Coffee Risk Analysis

Luckin Coffee disclosed 108 risk factors in its most recent earnings report. Luckin Coffee reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Luckin Coffee Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LKNCY	80 Outperform	$9.08B	25.03	25.80%	―	36.78%	0.76%
CAVA	69 Neutral	$8.69B	68.33	20.58%	―	32.25%	873.48%
BROS	66 Neutral	$8.38B	149.64	7.82%	―	32.64%	943.64%
WEN	64 Neutral	$2.67B	14.07	68.30%	7.52%	2.98%	-2.58%
SBUX	62 Neutral	$93.26B	26.53	-47.07%	2.87%	-1.48%	-17.32%
Sector *	59 Neutral	$11.20B	10.09	-1.41%	3.96%	1.31%	-16.95%
SG	47 Neutral	$2.45B	―	-19.46%	―	15.89%	22.07%

* Consumer Cyclical Sector Average

Performance Comparison

LKNCY

Luckin Coffee

32.01

6.01

23.12%

SBUX

Starbucks

82.10

-2.92

-3.43%

WEN

Wendy's

13.30

-4.20

-24.00%

BROS

Dutch Bros Inc

51.37

19.01

58.75%

Sweetgreen

20.88

-4.25

-16.91%

CAVA

CAVA Group, Inc.

75.19

10.25

15.78%

Luckin Coffee Earnings Call Summary

Earnings Call Date: Feb 20, 2025 | % Change Since: 7.85% | Next Earnings Date: May 6, 2025

Earnings Call Sentiment Positive

The earnings call presented a strong performance with significant revenue and store expansion, improved operating profits, and successful customer growth. However, challenges remain with same-store sales growth and rising coffee bean prices, which the company plans to address through strategic measures.

Highlights

Significant Revenue Growth

For the full year 2024, total net revenues increased by 38% year-over-year to RMB34.5 billion, with a notable 36% increase in the fourth quarter to RMB9.6 billion.

Store Expansion

Luckin Coffee opened over 6,000 net new stores in 2024, reaching a total of 22,340 stores by year-end, including 14,540 self-operated stores and 7,749 partnership stores.

Increase in Average Monthly Transaction Customers

The number of average monthly transaction customers increased by 48% year-over-year to 71.8 million, with over 330 million cumulative transaction customers by the end of the fourth quarter.

Improved Operating Profit and Margin

Operating profit increased by 17% to RMB3.5 billion for the year, with operating margin expanding by 7.4 percentage points year-over-year to 10.4% in the fourth quarter.

International Expansion

Luckin Coffee entered the Malaysian market and added new stores in Singapore, demonstrating progress in international expansion.

Lowlights

Same-Store Sales Growth Challenges

Same-store sales growth for self-operated stores showed a negative trend for much of the year, although it improved to negative 3% in the fourth quarter and turned positive in December.

Rising Coffee Bean Prices

The company acknowledged the significant rise in coffee bean prices, which could create cost pressures despite plans to mitigate these through supply chain advantages.

Company Guidance

During the Luckin Coffee Fourth Quarter and Full Year 2024 earnings call, the company reported significant growth and provided guidance for continued expansion and strategic focus in 2025. Total net revenues for the year increased by 38% year-over-year to RMB34.5 billion, with operating profit rising 17% to RMB3.5 billion. The company maintained a rapid pace of store expansion, adding over 6,000 net new stores in 2024, bringing the total to 22,340 stores. Luckin Coffee also reported an increase in average monthly transaction customers by 48% to 71.8 million and achieved a 55% rise in cups sold of freshly brewed beverages, reaching nearly 3 billion. For the first quarter of 2025, the company aims to sustain its industry-leading store growth and enhance operational efficiency, with a focus on maintaining stable per-cup pricing and increasing per-store daily cup sales. Despite pressures from rising coffee bean prices, Luckin plans to leverage its robust supply chain and scale advantages to mitigate impacts and does not currently plan to increase prices, continuing its mission to provide high-quality, affordable coffee.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.