Luckin Coffee’s Stock (LKNCY) Gains Bullish New Analyst Coverage

Luckin Coffee's stock (LKNCY) has been a notable gainer this year, climbing +37.59% YTD as sentiment remains firmly bullish in the name. This could be set for a further shot after Macquarie initiated coverage with an ‘Outperform' rating.

Macquarie analyst Linda Huang's positive assessment of China's rapidly expanding coffee market was reason for the bullish initiation, with the firm highlighting the increasing number of coffee drinkers and rising per-capita consumption in China, noting Luckin's successful overtaking of Starbucks as the country's largest coffee chain.

As of mid-2025, Luckin operates an impressive 26,000 stores, a testament to its aggressive expansion strategy. Macquarie expects Luckin to sustain a net profit growth rate of at least 20% per year, further fueling investor optimism.

This bullish sentiment is further supported by Luckin's strong financial performance in the second quarter of 2025. The company reported a 47% year-over-year increase in net revenue and a 44% rise in net income. Luckin's store expansion continued at a rapid pace, with 2,109 new stores opened during the quarter, bringing the total to 26,206. Customer engagement also saw substantial growth, with average monthly transacting customers reaching 91.7 million, a 31% year-over-year increase. These figures demonstrate a robust recovery from the challenges faced in 2024, particularly the negative same-store sales growth.

Luckin Coffee's recent foray into the U.S. market with its first stores in New York City marks a significant step in its international expansion strategy. While challenges remain, including adapting to U.S. labor costs and regulatory requirements, the company's initial promotions and digital-only ordering system have generated considerable attention and consumer interest. The U.S. expansion introduces a new avenue for growth, albeit one that requires careful navigation.

The competitive landscape in China is also shifting, with Starbucks facing increased pressure from local brands like Luckin Coffee. Starbucks' declining market share, from 34% in 2019 to 14% in 2024, has led to considerations of strategic partnerships or a partial divestiture of its Chinese operations. Potential bidders have valued Starbucks' China business at approximately $5 billion, underscoring the intense competition and the value placed on a strong presence in the Chinese coffee market.

Macquarie's ‘Outperform' rating and $52 price target suggest confidence in Luckin Coffee's ability to continue its growth trajectory. With the stock currently changing hands at $37.59, the target reflects a perceived upside of 38% from here.