Luckin Coffee (OTCMKTS:LKNCY), a Chinese coffee company with coffeehouse operations, shot up just over 22% yesterday with just over 10 times the normal trading volume. That momentum has continued into this morning's trading session with the company above yesterday's close. The company staged the surge on the strength of recently-released earnings reports, including multiple restated earnings reports. This is excellent news for the company and investors, but for financial analysts, the Luckin Coffee news has fallen on deaf ears as there is no commentary available.
Luckin Coffee's Multiple Restated Results
Luckin Coffee grew famous in late 2019 going into 2020 for trying to be the Chinese Starbucks (NASDAQ:SBUX). Luckin looked to accomplish this with a particular focus on mobile technology, offering vouchers redeemable for cups of coffee at its rapidly-expanding number of kiosk and coffeehouse locations. Luckin ran into trouble, a Wall Street Journal report noted, when a large number of those vouchers were sold to companies that had ties to Luckin's then-chairman, Charles Lu. This allowed the company to book hefty revenue numbers.
This led to Luckin Coffee being delisted on the NASDAQ exchange around this time last year. However, Luckin recently rolled out revised data for at least some of the time in question, bringing new light to the company's operations and reflecting plans to “return to normalized financial reporting,” as Luckin Coffee CEO and chairman Dr. Jinyi Guo noted.
Luckin reported results for the fourth quarter of 2019, noting that revenue was around $150.8 million US which was around 2.5 times what it had been the fourth quarter of 2018. This still resulted in a net loss of around $162.1 million, yielding an adjusted loss of close to $0.64 per share.
Meanwhile, for the older revisions, the company noted that the false transactions that helped propel Luckin to such heights amounted to close to $328 million US, while the company's expenses were also inflated by $208 million. This leaves a gross margin of around $120 million, which has now been removed from corporate accounting.
The impact of this is substantially less than might be expected, though; Luckin Coffee, at last report, has a market capitalization of close to $3 billion. With these results coming to light, investors seem satisfied overall, and are willing to put fresh investment back into a company that still could be called the Chinese Starbucks. Dr. Guo supports this point, noting that the company now has a new leadership team and a “...viable plan that is driving growth for Luckin Coffee and long-term value creation for our shareholders.”
How Do Financial Analysts Feel About Luckin Coffee Stock?
While Dr. Guo is clearly optimistic about his company's future, the financial analyst community is much less so. In fact, the current answer to the question of how financial analysts feel about Luckin Coffee stock, based on our latest research, is as simple as it is stark: they don't. There hasn't actually been an analyst position recorded on Luckin Coffee since April of 2021.
A year ago, the company had two “buy” ratings and one “hold” to its credit. That held true until April, when it slipped to just one “buy” rating, and no “hold” ratings. Now, there are no ratings at all on Luckin Coffee. There are also no price targets on Luckin Coffee.
The last rating recorded was back in April 2020, when Needham & Company reiterated its “buy” rating on Luckin Coffee with a price target of $40. The company previously held ratings from Morgan Stanley, KeyCorp and Credit Suisse, among others, and most of these were looking for share prices in the $40-$60 range.
It's worth noting that share prices for Luckin Coffee have been engaged in a pattern of gains for much of the last year. The stock has seen value fluctuations, of course, but the share price closed yesterday at $11.28. A year ago at this time, the company closed at $1.38. The company even saw a share price of $13.32 back in January, which suggests that the recently-revised company may be making something of a comeback.
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