Chinese coffee chain Luckin Coffee Inc LK is expected to report "strong" metrics in its first-ever earnings release Aug. 14, according to KeyBanc Capital Markets.
The Analyst
Eric Gonzalez maintained an Overweight rating on Luckin Coffee with an unchanged $22 price target.
The Thesis
Heading into Luckin's earnings report, Gonzalez said in a Friday note that he is modeling for the following metrics. (See his track record here.)
- The addition of 5.4 million new customers.
- A retention rate close to 30%
- A gross average selling price (before taxes, excluding free offers) of close to 11 yuan ($1.56).
- Total sales of 85 million items across approximately 2,900 stores, or 358 average units sold per day.
- Total revenue of around 850 million yuan (consensus 854 million yuan).
- Restaurant-level losses of around 850 million yuan (consensus 110 million yuan).
- An operating loss of around 746 million yuan (consensus 703 million yuan).
Mobile App Data
Data from QuestMobile can be used to gauge Luckin's mobile app usage given a correlation of more than 90%, the analyst said.
Extracting the data suggests the app's monthly active users rose around 34% from last year and 49% from the end of 2018.
Active users as a percentage of total transacting customers averaged around 80% from January 2018 to March 2019 and, if it held steady, the data suggests the company ended the second quarter with 6.5-7 million active users.
Finally, July monthly active users were 33% higher versus the second-quarter average, which implies continued "strong" trends in the third quarter, according to KeyBanc Capital Markets.
Price Action
Shares of Luckin Coffee were down 0.17% at $27.06 at the time of publication Monday.
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