Shares in Luckin Coffee Inc.(Nasdaq: LK) plunged to $17.60 apiece by 5 percent intraday Tuesday even though it got a Buy rating and a price target of $27 by Wall Street.
The Xiamen-based Chinese coffee chain served up a hot debut and it opened at $25 per share, surging 47 percent on IPO day.well above its IPO price of $17.
Investment bank Needham & Company, LLC granted Luckin a Buy and set its price target of $27 per American depositary share.
"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," Needham commented.
Since its inception in June 2017, the company has expanded at breakneck speed. In the past 18 months, it has expanded from a single trial store in Beijing to 2,370 stores in 28 cities in China as of March 31. In other words, it opens 4.39 stores every day.
Morgan Stanley assigned a price target of $21.
Eric Gonzalez from KeyBanc Capital Markets Inc. thought $22 per share was a reasonable price target. He took a bullish stance with Luckin Coffee’s unique position in China’s hyper-growth market, the limited competition, low development costs, better tech and data analytics than peers and low per-unit cost structure.
The company has warned it may continue to incur losses in the foreseeable future in its prospectus in May.
Since inception in June, 2017, the company has been in the red, with net loss to shareholders at $475.4 million and total revenue of $125.27 million last year. The company reported losses of $85.3 million for the three months through March.
But KeyBanc said it expects Luckin to turn profitable as soon as early 2021.