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Luckin Coffee Stock Rose 5.96% on Q4 and FY21 Results Despite Losses

Simon Mugo trader
Updated 24 Mar 2022

Trade Luckin Coffee stock Your capital is at risk

Key points:

  • Luckin Coffee stock rose 5.96% in Q4 and FY 2021 results despite losses.
  • The Chinese coffee chain reported a revenue surge, but it wasn’t enough.
  • Investors are waiting for the company to become profitable rewarding them.

The Luckin Coffee Inc – ADR (OTCMKTS: LKNCY) stock price rallied 5.96% after its Q4 and FY 2021 unaudited results.’

The Chinese coffee chain revealed that it generated RMB2,432.7 million (US$381.7 million) in revenues during Q4, representing an 80.7% improvement compared to the RMB1,345.9 million generated in Q4 2020.

Also read: The Best Organic Food Companies To Buy Right Now.

The company opened 353 new stores in Q4 bringing its total number to 6,024 at the end of 2021, with 4,397 stores being operated by the company, while its partners operate 1,627 stores.

Luckin reported that the average number of customers buying its coffee rose to 16.2 million customers, a 67.1% increase to the 9.7 million customers at the end of Q4 2020. In addition, the company grew same-store sales by 43.6%, marking a significant improvement to the 9.2% growth in Q4 2020.

The coffee chain’s operating margins for its self-operated stores rose to 20.9% compared to the 8.7% margins recorded in a similar period in 2020. Furthermore, the revenues from stores operated by its partners rose to RMB448.8 million (US$70.4 million) in Q4, marking a 248.4% jump from the RMB128.8 million recorded in Q4 2020.

Investors cheered the earnings results, as evidenced by the premarket rally, but I was hoping for a more significant rally.

Despite growing its revenues significantly, Luckin coffee is yet to become profitable as it reported a GAAP operating loss of RMB120.8 million (US$19.0 million) compared to RMB488.9 million in the same period in Q4 2020.

The company expects the losses associated with its recent restructuring and fabricated transactions to reduce in Q2 2022 after its provisional liquidation in Q1 2022.

Dr Jinyi Guo, Luckin Coffee’s Chairman and CEO, said: “We are very pleased to report strong overall performance in the fourth quarter and fiscal year 2021. We opened more than 350 net new stores during the quarter and are one of the largest coffee networks in China by the number of outlets, with more than 6,000 stores as of December 31, 2021. Building on our positive momentum, the team has delivered strong same-store sales growth for our self-operated stores resulting from the increased number of transacting customers, increased items sold and higher average selling prices.”

If Luckin Coffee shares keep rising, the next target will be the $13 resistance level, after which the $15 level is the next target. A break below $8 would invalidate the bullish thesis.

*This is not investment advice. Always do your due diligence before making investment decisions.

Luckin coffee stock price.

Luckin coffee stock price 24-03-2022
Source: Tradingview

Luckin Coffee’s stock rose 5.96% to trade at $11.55, rising from Wednesday’s closing price of $10.90.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading