Wall street analysts note fast mobile user growth from Luckin Coffee, China’s fastest-growing coffee chain (Nasdaq: LK).
A report from KeyBanc Capital Markets Inc. (KeyBanc) using data from QuestMobile found that Luckin’s monthly active user (MAU) growth was very strong on both its mobile app and WeChat “Mini Program”. KeyBanc analysts believe that app usage data is an important indicator for Luckin’s current and future sales trends.
According to QuestMobile data, Luckin’s MAUs increased by 51% during 2019 Q3 and by a whopping 460% YoY. The data showed that Luckin had between 9 and 10 million active users during Q3. KeyBanc analysts said this prediction is more positive than their own Q3 estimate of 7.5 million active users or their Q4 estimate of 8.6 million active users.
As for Luckin’s WeChat “Mini Program”, QuestMobile reported a 21% increase in MAUs in September alone. The number of Luckin’s application installations also increased 32% from Q2 to Q3. The KeyBanc report said that these numbers indicated the brand’s momentum and growing following.
Listed on Nasdaq on May 17, Luckin’s stock surged 47% on the first day of trading with an IPO priced at USD 17 per ADS (American Depositary Share). After all, the then 18-month-old unicorn coffee chain showed Wall Street China’s huge potential for coffee consumption. Luckin’s IPO filing report stated that the average person in mainland China drank 6.2 cups of coffee in 2018. According to Frost & Sullivan, that number is expected to increase to 10.8 cups per capita (15.5 billion cups) by 2023.
In June, Keybanc analyst Eric Gonzalez gave luckin an “overweight” rating and USD 22 price target. He reported that the company’s prospects look good given China’s rapidly growing coffee culture and luckin’s promising business model, low development costs, and lack of significant direct competitors.
Luckin’s growth has demonstrated Chinese customers’ growing consumption of not only coffee but also tea beverages. In early September, the coffee chain announced that its tea brand “Luckin Tea” would operate independently. As of March 2019, just over a year since it began operating, Luckin had opened 2,370 stores across China. It aims to expand to 4,500 by the end of this year and become the country’s largest coffee chain by expanding to 10,000 shops by 2021.
(Top photo from Pixabay)