3 Reasons to Buy Luckin Coffee Stock in 2026
- - 3 Reasons to Buy Luckin Coffee Stock in 2026
Will Ebiefung, The Motley FoolDecember 21, 2025 at 8:54 PM
0
Key Points -
Luckin Coffee continues to expand rapidly, and it has established a foothold in North America.
Shares still trade at a reasonable valuation. And there are significant catalysts for future stock price appreciation.
10 stocks we like better than Luckin Coffee ›
With the share price up by roughly 271% over the last five years, Luckin Coffee (OTC: LKNC.Y) has been a perennial winner in the aftermath of the fraud scandal that saw its shares delisted from the Nasdaq in 2020. The company has convincingly bounced back under new management.
And it is now undertaking an ambitious international expansion that could help it go toe-to-toe with industry titans like Starbucks (NASDAQ: SBUX) on their home turf. Let's discuss three reasons Luckin's stock is still a compelling long-term buy.
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1. Luckin's business is booming
In 2019 and 2020, Luckin's managers were found to have exaggerated the company's revenue and expenses to make things look better than they actually were. This scandal eventually led to a $180 million penalty from the Securities and Exchange Commission, Chapter 15 bankruptcy restructuring, and leadership changes.
That said, underneath the surface, Luckin was still a fast-growing quality business, and the scandal made its shares too cheap to ignore, leading to a multiyear rally that shareholders are still enjoying today. Third-quarter earnings highlight the company's impressive business momentum.
Net revenue jumped 50.2% year over year to $2.14 billion as Luckin benefits from 3,008 new store openings, mainly in its home market of China. Same-store sales (which measure revenue growth in existing locations) spiked by 14.4%, which is considered quite good in the restaurant industry. For context, Starbucks reported same-store sales growth of just 1% globally in its most recent financial report.
2. International sales are a huge opportunity
Luckin's rapid success can be attributed to its unique branding and take on customer service, which seem to have appealed to Chinese consumers much more than the strategy used by Western rivals. Instead of trying to become a cozy "third space," its model maximized convenience and impersonality. Human cashiers were replaced by a mobile app, where consumers can expect to find promotional discounts of 30% to 50% on their drinks, according to CNBC.
Now, the coffee chain believes it can replicate its Chinese success in international markets -- first targeting more culturally similar Asian countries like Singapore and Malaysia -- before its ambitious push into the U.S., which could potentially supercharge revenue growth if things go as planned.
As of September, Luckin has opened five locations in New York City, in valuable high-traffic areas like Midtown Manhattan and Washington Square Park near New York University. These are the types of areas where it can attract guests and, perhaps more importantly, boost its brand visibility.
The U.S. already has plenty of coffee chains, and Luckin will have to work hard to stand out. The large number of Chinese students in other countries could be essential because they are likely already familiar with the brand and can help popularize it in new markets.
The company's vast, profitable business in China could also give it the financial leeway for aggressive and potentially loss-leading promotions in new markets. It's also using its deep pockets to shop for acquisitions. Bloomberg reports that management is considering bidding on specialty coffee roaster Blue Bottle Coffee (currently owned by Nestlé) to expand its footprint in the premium side of the industry.
3. The stock's valuation remains attractive
Despite all the positive momentum for the company, Luckin Coffee stock still trades for a rock-bottom valuation. The stock's forward price-to-earnings multiple (P/E) is just 15, compared to that of Starbucks, which trades for 36 times forward earnings. The S&P 500 has an average estimate of 22.
Some of the pessimism reflected in that may be related to the fact that Luckin's shares are listed on the over-the-counter market, which is generally less liquid and respected than mainstream exchanges like the Nasdaq or the New York Stock Exchange. That said, CEO Jinyi Guo plans to relist the company in the U.S., which could help unlock a better valuation. Shares could easily double over the next few years.
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Source: “AOL Money”
