Shareholders will be ecstatic, with their stake up 21% over the past week following Luckin Coffee Inc.'s (NASDAQ:LK) latest third-quarter results. The results don't look great, especially considering that statutory losses grew 20% toCN¥2.29 per share. Revenues of CN¥1.6b did beat expectations by 4.7%, but it looks like a bit of a cold comfort. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Luckin Coffee after the latest results.
After the latest results, the nine analysts covering Luckin Coffee are now predicting revenues of CN¥13.2b in 2020. If met, this would reflect a sizeable 290% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching CN¥1.84 per share. Before this latest report, the consensus had been expecting revenues of CN¥13.4b and CN¥2.32 per share in losses. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the considerable lift to earnings per share expectations following these results.
These new estimates led to the consensus price target rising 7.8% to US$31.01, with lower forecast losses suggesting things could be looking up for Luckin Coffee. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Luckin Coffee at US$53.00 per share, while the most bearish prices it at US$23.45. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Luckin Coffee's performance in recent years. We would highlight that Luckin Coffee's revenue growth is expected to slow, with forecast 290% increase next year well below the historical 440%p.a. growth over the last year. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 7.9% next year. So it's pretty clear that, while Luckin Coffee's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Luckin Coffee going out to 2021, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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