Luckin Coffee stock price continues its strong uptrend as its growth momentum gains steam. LKNCY jumped to a high of $37.27 on Monday, its highest point since April 3, and 117% above its lowest level last year. It has also formed a highly bullish pattern, pointing to more gains.
Luckin Coffee stock rises after US expansion
Luckin Coffee, a popular coffee chain in China, continued its uptrend this week after expanding in the United States. It opened two locations in the United States, a move that will lead to more competition to Starbucks, its embattled rival.
The company hopes to replicate its success in China in the United States, where it hopes to be a big player. Like in China, it will likely aim to compete in terms of pricing, a move that may impact Starbucks margins. For example, it is promoting a $1.99 drink deal on its applications.
Luckin Coffee has been on a strong growth trajectory in recent years, expanding from a handful of locations to over 24,000 globally. It has already overtaken Starbucks in China, and is now eying global domination by launching in places like Malaysia and Singapore. Media reports suggest that Starbucks may be eying exiting China.
Some of the potential markets it could enter in the future are in South Korea, Japan, Canada, United Kingdom, and Turkey. Starbucks has over 1,870 locations in South Korea, 1,733 in Japan, 1,458 in Canada, and 1,266 in the UK. These could become good places for it to expand to.
Read more: Luckin Coffee stock analysis: Is Cotti Coffee a big threat?
Growth to continue
The most recent results showed that Luckin Coffee’s business was growing rapidly. Its revenues jumped by 42% to RMB 8.9 billion, while its gross merchandise volume soared by 42% to RMB 10.4 billion. This growth happened as the average monthly transacting customers soared to over 74.3 million.
Luckin Coffee’s growth is notable because Starbucks, its biggest competitor, is deteriorating and is implementing a turnaround effort.
Its strong footprint is largely due to its franchise model, with self-operating stores accounting for 8.1%. Revenue from the self-operated stores was RMB 6.4 billion, a figure that has continued growing.
Wall Street analysts anticipate that Luckin Coffee’s business will continue growing in the coming years. The average estimate is that its revenue will grow by 32.6% this year to $6.26 billion, followed by $7.23 billion next year.
Luckin Coffee stock price analysis
The daily chart shows that the Luckin Coffee share price has jumped in the past few months. This rally started after it bottomed at $17.27 on August 2.
It has formed a cup-and-handle pattern, and is now completing the formation of the handle section. This cup has a depth of about 55%, meaning that the stock has a target of $60. This target is estimated by measuring the same distance from the cup’s upper side.
A drop below the lower side of the handle section at $24 will invalidate the bullish Luckin Coffee stock price target.
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