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Luckin Coffee Stock Price Target

Starbucks and Luckin Coffee take advantage of low coffee prices and fly to highs

Luckin Coffee Stock Price Target

The price of agricultural raw materials is quoted near the 2006 minimum zone and the prospects are not very rosy due to oversupply. 

Starbucks and its Chinese counterpart, Luckin Coffee , are going through a good time in the park and are listed in the area of ​​historical highs. In the case of the first, it is striking because it debuted on Wall Street several decades ago and only this year it shoots close to 45%. For its part, the second landed in the US parquet a few months ago (in mid-May) and did so at $ 17. Price that would soon be very outdated since it is currently trading at $ 23. That is, it flies 35% in just over two months. 

Among the arguments of the bullish rally of Starbucks and Luckin Coffee there are many reasons but among them one stands out: the price of coffee. Agricultural raw material is one of the most bearish during this course since it accumulates a 10% drop in the last twelve months and almost 30% in three years. In addition, only during the last month it gives up around 5%. 

These companies, focused on the sale of coffee, benefit from the low price of the raw material, which is expected to continue in the short or medium term . Aneeka Gupta, director of analysis at WisdomTree, noted that "coffee prices are facing increased supply, driven mainly by Brazil and Vietnam. The International Coffee Organization (ICO) expects production to exceed current in the current season. demand for the second year in a row. In fact, seasonal coffee exports from South America and Southeast Asia have been strong and should weigh on prices until the market dwindles from strong stocks. " 

Another reason that has favored the good evolution of Starbucks has been its good results. Kevin Johnson, president of the American company, has pointed out after the presentation of the third quarter that " our two long-term growth markets, the United States and China, performed very well thanks to the focus on improving the customer experience, driving the innovation with new beverages and accelerate the expansion of the digital relationship with customers. " 

As if that were not enough, and after the boost of their business, they raised their financial outlook for the year as a whole , forecasting a 4% improvement in store sales compared to the previous one of between 3% and 4%. On the other hand, global companies will advance 7% compared to between 5% and 7% previously forecast. The market received these news with optimism and they rewarded Starbucks for shooting up, only this Friday, 7% on Wall Street and reaching a capitalization of 110.190 million dollars (99.030 million euros). 

Starbucks' good performance is also based on the expansion of the company. The American company closed its third final quarter with a net opening (openings minus closings) of 442 establishments and almost a third taking place in China and 48% in other international markets. Therefore, the management is aware that it must stand up to Luckin Coffee in its own country and, therefore, intensifies the opening of stores in the country, where its rival already has about 2,500 stores, the second largest coffee company. . 

The great battle in China, for now, is lost by Luckin Coffee . The Asian company does not have the financial 'muscle' that the US does, which maintains (clearly) its hegemony in the country by being present in more than 150 cities in that country compared to the thirty that its rival would have. Why so much difference? Because the true potential of Luckin Coffee lies in its "100% ATM-free environment", with home orders and favored by technology. 

The market consensus has doubts about the evolution of Starbucks . Investment banks advise 'keeping' their shares and the strong rally of the last sessions has meant that, in the face of future revisions (on the upside) that could be applied after its good results, it ran out of potential as they set a price of 81 , $ 37, that is, a target price below the more than $ 97 at which it is listed. 

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