Goldman Sachs Initiates Coverage of Luckin Coffee with a Bullish Outlook: Expanding Against the Trend Amid Price War, Mainland China Target of 55,000 Stores Achievable

Goldman Sachs has initiated coverage of Luckin Coffee for the first time, assigning a Buy rating. The report highlights that China’s largest freshly brewed coffee brand has demonstrated a strong moat amid fierce price competition. The mainland market still has significant room for store expansion, while margin improvement and shareholder return potential serve as additional upside catalysts.

Goldman Sachs has set a 12-month target price of $49 for Luckin Coffee, indicating an implied upside of about 61% from the current share price of $30.51. The valuation is based on 21 times the expected 2026 price-to-earnings ratio, applying a 10% discount to the OTC market. Luckin, leveraging its leading scale advantages and digital capabilities, still has significant room to increase its market share in China's freshly brewed beverage market, viewing 55,000 stores as an attainable goal.

From 2025 to 2028, Luckin’s revenue and Non-GAAP net profit are expected to achieve a compound annual growth rate of 19% and 26% respectively, driven by store expansion, margin recovery as delivery subsidies normalize, and continuous improvement in operational efficiency. Meanwhile, with the company expected to turn accumulated losses into accumulated profits by 2026, shareholder return prospects also open up—Luckin announced a $300 million share buyback program in April 2026, roughly accounting for 3% of its market capitalization.

Target of 55,000 Stores: Scale and Digitalization Forge the Expansion Moat

Luckin still has ample room for store expansion in mainland China. By the end of 2025, Luckin operated over 30,000 stores across mainland China, achieving a 28% share of the freshly brewed coffee market GMV, about twice that of the second-largest brand, Starbucks. Using 7-Eleven City Café’s 35% share of Taiwan's freshly brewed coffee market as a benchmark, if Luckin reaches the same market share, the corresponding number of stores would be around 56,000.

There are three core logics supporting this target:

First, Luckin’s average price is about 14 RMB, only half of Starbucks’, and equivalent to 0.4 times the hourly wage in mainland China. High accessibility and cost-effectiveness lay the foundation for increased penetration rates;

Second, by encouraging users to order via its own app or mini-program, Luckin has accumulated over 98 million monthly active transacting users and 450 million registered members, forming a strong data-driven operational capability. In 2025, R&D investment exceeds 600 million RMB, ranking first among leading freshly brewed beverage brands;

Third, non-coffee products (including freshly brewed tea drinks, fruit and vegetable juices, etc.) have accounted for more than 20% of cup sales in 2025, helping to expand consumption scenarios and customer base in lower-tier cities.

A bottom-up scenario analysis also indicates that, based on per capita consumption across city tiers, Luckin’s upper limit for store numbers in mainland China could reach about 69,000.

Price War Becomes More Rational, Margin Recovery Path is Clear

Luckin’s Non-GAAP operating margin reached a historical peak of 13% in 2023, but dropped to about 11.5% in 2024-2025 due to an intense price war with Cotti Coffee (which carried out all-category promotions at 9.9 RMB/8.8 RMB from 2023 to 2024) and the dilution effect from rapid store expansion on same-store sales growth (SSSG).

The competitive landscape in 2026 is clearly better than in the trough years of 2023-2024. Cotti canceled its all-category 9.9 RMB promotion in February 2026, and channel checks show it suffered a marked deterioration in store-level margins after subsidies faded, with net store closures occurring recently.

Meanwhile, the normalization of delivery platform subsidies will drive Luckin’s delivery order proportion down from 35%-45% in Q3-4 2025 to about 30%, while the cost per delivery order is expected to see a high-single-digit percentage year-over-year decline. As such, Luckin’s operating margin year-over-year growth is expected to turn positive starting in Q3 2026.

Looking ahead to 2028, it is forecasted that Luckin’s Non-GAAP operating margin will gradually rise to 14%, net margin will reach 10%, and free cash flow as a percentage of revenue will also improve to a high single-digit percentage.

Overseas Expansion: Southeast Asia Promising, US Market Still Needs Time

A cautious outlook is maintained for Luckin’s overseas business, expecting that by 2028, overseas revenue contribution will only account for a low single-digit percentage.

In the Southeast Asian market, Luckin currently has about 82-83 stores each in Singapore (directly operated) and Malaysia (a franchise model in partnership with local firm Hextar Industries Berhad). The market size for freshly brewed beverages in Southeast Asia is only about 0.3 times that of China. Even following Mixue Ice City’s expansion trajectory in Southeast Asia, its overseas GMV is only a mid-single-digit percentage of the China market, so the growth potential is relatively limited.

In the US market, Luckin faces higher barriers: Starbucks and Dunkin' together account for about two-thirds of the US specialty freshly brewed beverage store numbers; consumers’ habit of digitally ordering via app is not yet established; and store opening processes are more complicated and costly. Even if execution is smooth, Luckin’s scaled expansion in the US will take longer.