The Coronavirus Might Not Be Luckin Coffee’s Only Concern


China’s coronavirus outbreak has hurt Luckin Coffee (NASDAQ:LK) in recent weeks. Since hitting a 52-week high of $51.38 on Jan. 17, LK stock has fallen nearly 25%.

The drop is mainly due to the operator of coffee shops being forced to close stores. Overall, though, Luckin is up 91% over the past 52 weeks. So, its supporters are likely to view this slight fall as merely a bump in the road.

Having come so far, so fast, I’m inclined to believe the fall in its share price has less to do with the coronavirus and more to do with the fact it is overvalued compared to Starbucks (NASDAQ:SBUX) — its much stronger coffee rival.

Currently, Luckin trades for more than 18 times sales, while Starbucks is selling at less than four times sales. Analysts and other experts — including InvestorPlace contributors — are all over the map when it comes to handicapping this particular horse. So if you’re looking for a unanimous agreement on Luckin, I don’t think you’re going to find it.

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