Luckin Coffee, Inc. manufactures coffee and operates coffee retail stores. The firm’s new retail model is built upon mobile apps and store network. The Mobile Apps: Mobile apps cover the entire customer purchase process. The Store Network: Its pick-up stores have limited seating and are typically located in areas with high demand for coffee, such as office buildings, commercial areas and university campuses. It procures coffee machines and coffee condiments from renowned global suppliers such as Schaerer.
Market and Industry News (5)
Guidance/Prospects (3.5)
China-coffee market reached $8B USD in 2018, 30% YOYG. Estimated to top $27B USD by 2023, 26% CAGR.
Chinese cup of coffee per year per capita is 6.2 (2018) compared to adjacent cultures of 200 per capita in Japan.
2017 to 2018 Luckin went from 9 stores to 2073. Starbucks went from 3100-3700 in same time period. Nov. 2019 $LK has crossed 3600 locations. 94% of coffee shop market share is owned by NON-top 5 players
2019 Q4 sales expected to hit 2.2B Yuan (315M USD).
Expected to reach 4000 locations 12/31/2019.
Q3 store pre-opening loc costs of $3M USD representing a 26% decrease in such cost YOY due to efficiencies and unit economics.
Technical:
IPO price of $17, stock trades at ~$35.
Closed 18% above 21ema
38M float and 5.7M Average Volume. Options exchange does exist, illiquid IMHO.
Financial Background (4.9)
Catalysts and Binary Events (-)
EPS 11/13/19 of ($0.32)
TTM sales 3.4B Yuan, Q3 sales of 1.5B Yuan, estimated 2020 sales of 4.5B Yuan.
Current ratio 4.23 reported 2019 Q3. Very liquid and QoQ growth of cash and assets.
Total Liabilities remains relative for TTM between 1.1B and 1.5B Yuan. Q3 2019 reported no long term debt.
Gross profit margin reported 22% 2019 Q3 compared to 2019 Q2 of 8%. TTM margin of 6%.
Earnings for Q4 2019 estimate reported 02/12/2020. EPS forecast of ($0.28).
Risks include share dilution IF second offering were to occur. Would be news announcement.
End of Q2 2019 showed 31 hedge funds with bullish positions in $LK via 13F. A year ago it was 0.
Alkeon Capital holds $57M stake, others include Point 72. Statements on insider buys and institutional holdings can move stock
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