Is Luckin Coffee’s New York Store Opening a Signal for More Growth in 2025?

Thinking about Luckin Coffee stock? You are not alone. With the shares recently closing at $38.31, and a year-to-date return of 42.3%, Luckin is catching eyes everywhere from Wall Street to local coffee drinkers. In just the last year, the stock has gained an impressive 90.2%. Looking out over the past five years, it has skyrocketed by more than 1200%. That is a clear example of compounding enthusiasm!

Some of Luckin’s latest moves are turning heads for good reason. While Starbucks has long been the global giant, Luckin has made headlines by opening its first New York City store just steps from a Starbucks location. This is not just a symbolic gesture; it is a confident stride onto the world stage after toppling Starbucks’ dominance in China in record time. That kind of boldness, along with strong app-based growth and aggressive expansion, has investors wondering just how high Luckin’s ceiling might be.

But high-flying growth stories often come with narratives about risk. You might notice that over the past week, Luckin’s shares have slipped by 1.5%, even while boasting a strong 1.1% gain over the last month. This hints at some near-term volatility, even as the long-term trend clearly leans upward. What really matters now for anyone thinking of buying, holding, or selling is how those gains stack up against Luckin’s true value.

That is where a valuation score comes in. Out of six major checks for undervaluation, Luckin Coffee scores a 5, signaling that by most standards, it looks attractively priced. Next, we will dissect exactly what those valuation approaches entail. And before you make your call, I will also share a less conventional and potentially even more insightful way to judge whether Luckin is the bargain or the runaway train in your portfolio.

Luckin Coffee delivered 90.2% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: Luckin Coffee Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company’s shares are worth by projecting out its future free cash flows and then discounting those projected amounts back to today’s value. This method focuses on what the business will earn over time, measured in hard cash, and how that compares with the current price tag.

For Luckin Coffee, the latest reported free cash flow is CN¥3.62 billion. Analysts see strong growth ahead, with projections suggesting this figure could rise to CN¥4.68 billion by 2027. Ten-year estimates, extrapolating beyond the available analyst consensus, anticipate free cash flow reaching CN¥9.22 billion by 2035. This rapid growth, along with the company’s aggressive expansion, supports a solid growth narrative for incoming cash.

After running these numbers through the DCF model, the estimated intrinsic value for Luckin Coffee comes out to $45.58 per share. This is a 16.0% discount compared to the current price of $38.31, suggesting that the stock may be undervalued by a meaningful margin.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Luckin Coffee.

Our Discounted Cash Flow (DCF) analysis suggests Luckin Coffee is undervalued by 16.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Luckin Coffee Price vs Earnings (PE)

For companies with a solid record of profitability, the price-to-earnings (PE) ratio is one of the most trusted yardsticks around. This metric tells investors how much they are paying for each dollar of earnings, making it especially insightful for growth companies like Luckin Coffee that are generating consistent profits.

Typically, a company with higher expected growth or lower risks commands a higher “normal” or “fair” PE ratio, while businesses with uncertain prospects or riskier profiles trade at a lower multiple. It is a market shorthand for how much conviction investors have in future earnings.

Luckin Coffee trades at a PE ratio of 22.3x, which is just below the hospitality industry average of 24x and well beneath the peer group average of 61.9x. But raw comparisons only go so far. That is where Simply Wall St’s "Fair Ratio" comes in. This proprietary measure evaluates what Luckin’s PE should be, not just based on the industry or peers, but also considering its earnings growth outlook, profit margins, risks, and size within the sector. For Luckin Coffee, the Fair Ratio is estimated at 32.0x.

By weighing Luckin’s actual PE against this tailored Fair Ratio, the shares currently look undervalued. Investors are paying less than what would be considered reasonable for a business with Luckin’s growth story and fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Luckin Coffee Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Narratives are your own investment story for a company. They connect your perspective on the business, such as what you believe about store growth, digital adoption, or future earnings, to a clear financial forecast and an estimated fair value.

Unlike traditional ratios, Narratives help you see the bigger picture by combining facts and your assumptions, then updating your fair value dynamically as news or results come in. On Simply Wall St’s Community page, millions of investors create Narratives to share how they expect companies like Luckin Coffee to perform, letting you see a rich collection of viewpoints in one place.

Narratives make it simple to compare the current price of a stock to its Fair Value based on your outlook, so you can decide if it is time to buy, hold, or sell. For example, some Luckin Coffee investors believe rapid expansion in China and digital innovation will drive earnings up, supporting a fair value of $46.89 per share. More cautious investors who focus on rising costs and stiff competition see a much lower fair value of just $37.90.

With Narratives, you are not just following numbers. You are investing in a story you understand, one that adapts as the market evolves.

Do you think there's more to the story for Luckin Coffee? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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