Goldman Sachs Initiates Coverage on Luckin Coffee with Buy Rating and $49 Price Target
Alina Collins
Goldman Sachs initiated coverage of Luckin Coffee with a Buy rating and a $49 price target, implying roughly 61% upside; the bull case rests on China's still-underpenetrated fresh-brewed coffee market, a fading price war, and a clear path back to margin recovery.
Where does the $49 target come from?
Goldman values Luckin at 21× estimated 2026 P/E, then applies a 10% discount because the stock trades on the OTC market — less liquid than a major exchange.
This means → even after the liquidity haircut, Goldman sees the current $30.51 price as deeply undervalued, with ~61% implied upside.
On earnings, Goldman forecasts 2025–2028 revenue CAGR of 19% and Non-GAAP net-profit CAGR of 26%, with net margin reaching 10% and free-cash-flow yield hitting high single digits by 2028.
30,000 stores and still not enough — where is the ceiling?
Luckin now operates over 30,000 stores in mainland China, holding a 28% GMV share of the fresh-brewed coffee market — roughly twice Starbucks.
Goldman benchmarks against 7-Eleven's City Café, which holds 35% of Taiwan's fresh-brewed market. Matching that share would put Luckin at roughly 56,000 stores; a bottom-up scenario analysis stretches the ceiling to about 69,000.
In plain terms = from 30,000 to 56,000, there is nearly a doubling of store-count runway — and that is the foundational assumption behind Goldman's Buy call.
What moat supports the expansion?
Price accessibility: Luckin's average cup costs about ¥14 — half of Starbucks, equal to 0.4× an average mainland hourly wage. That makes penetration into lower-tier cities a natural fit.
Digital operations: over 98 million monthly active transacting users, 450 million cumulative members, and 2025 R&D spend exceeding ¥600 million — the highest among major fresh-beverage brands.
Category broadening: non-coffee products (fresh-brewed tea, fruit-vegetable juices) already account for over 20% of cup volume, opening new consumption occasions in lower-tier cities.
Is the price war over?
Luckin's Non-GAAP operating margin peaked at 13% in 2023, then slid to roughly 11.5% in 2024–2025 as an intense price war with Cotti Coffee and rapid store expansion diluted same-store sales.
A turning point has emerged: Cotti cancelled its blanket ¥9.9 promotion in February 2026. Channel checks show its store-level margins have deteriorated sharply once subsidies faded, and it has recently seen net store closures.
This means → the most aggressive phase of the price war is likely behind us. The competitor blinked first, giving Luckin's margin recovery an external tailwind.
When do margins actually recover?
Goldman expects delivery-order mix to fall from 35%–45% in Q3–Q4 2025 to about 30%, while per-order delivery costs drop by high single digits year-on-year. Operating-margin growth should turn positive from Q3 2026.
By 2028, Non-GAAP operating margin is projected to climb back to 14%.
As accumulated losses are expected to flip to accumulated surplus in 2026, shareholder returns open up — Luckin already announced a $300 million buyback in April 2026, roughly 3% of its market cap.
Can overseas markets become the second growth engine?
Goldman is cautious on overseas, projecting only low-single-digit percentage revenue contribution by 2028.
In Southeast Asia, Luckin has about 82–83 stores each in Singapore and Malaysia, but the region's fresh-beverage market is only about 0.3× the size of China's — a limited runway.
The U.S. is harder still: Starbucks and Dunkin' together hold roughly two-thirds of specialty fresh-brewed store count, digital ordering habits are less established, and store rollouts are more complex and costly. In plain terms = overseas is a long-dated option, not a near-term driver. Whether the Buy thesis holds depends on mainland margin recovery and store-expansion pace.
Content is for reference only, not financial advice.