Chinese coffee retailer Luckin Coffee (LK) – Get Report was rebounding Tuesday after analysts at Morgan Stanley issued a bullish note on the stock and boosted its price target to $42 from $27 a share.
The new price target represents a potential 13% upside from the stock’s previous closing price of $37.12. Shares were rising 6.55% in trading Tuesday to $39.56.
Morgan Stanley analysts are bullish on the company’s recent investments into its tea franchise and the company’s push into unmanned retail, which should lead to lowered costs over time.
The firm estimated the value of the company’s Luckin Tea franchise stores is about $15 a share and the company should be able to penetrate lower-tier cities in China while enabling “efficient network expansion without intensive capital commitments.”