Luckin Coffee Analyst Says Company Confident In Key Targets Despite Coronavirus Impact

Luckin Coffee Inc – ADR LK, which is being touted as a serious threat to Starbucks Corporation SBUX in China, discussed concerns surrounding the COVID-19 outbreak's effect on the coffee chain in a conference call with analysts. 

Luckin's Q1 Revenue Likely To Miss Expectations

Luckin now expects first-quarter revenue to end at nearly half the current estimate of 2.2 billion yuan ($315.3 million) to 2.3 billion yuan.

The extension of the Chinese New Year break into February following the coronavirus outbreak — and low volumes at the 500 stores that are open — are to be blamed for the expected shortfall, KeyBanc Capital Markets analyst Eric Gonazalez said in a Thursday note.

Luckin Confident In Recovery

Luckin expressed confidence in customers coming back once the virus abates, the analyst said.

The coffee chain expects most employers in the virus-hit region to keep offices shut until the week of Feb. 24, he said. 

The non-affected areas will likely return to normalcy within one to two months, and those areas near the epicenter of the epidemic are likely to take up three to four months, Luckin said, according to KeyBanc. 

The company's unmanned retail strategy is being rolled out at the right time, Gonzalez said. 

The analyst said Luckin could enact a "Buy 10/Get 10" offer as customers return to work.

KeyBanc: Luckin's Targets Achievable

Luckin reiterated its expectations for achieving breakeven in the third quarter with the help of its unmanned retail strategy, as well as its 2021 development goals for both traditional and unmanned retail, Gonzalez said. 

The company expects no changes to its 2021 outlook, according to KeyBanc. 

KeyBanc, which is a market maker in the stock, has an Outperform rating and $56 price target for Luckin shares.

Luckin shares were slipping 1.99% to $37.98 at the time of publication Thursday.

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