Luckin Coffee (LKNCY) is set to challenge rival coffee chain Starbucks (SBUX) on its home turf with a planned U.S. launch. The Chinese company is establishing its first American store, located at 755 Broadway at East Eighth Street in the East Village, New York City, though it has not yet announced an opening date.
Luckin Coffee also appears to be setting up a U.S. headquarters to manage the business outside of China. It has several positions available in Secaucus, New Jersey, which suggests this will be its American base of operations.
Investors will likely remember Luckin Coffee for its 2020 fraud controversy. This caught the attention of regulators and resulted in a $180 million fine and the departure of its previous leadership team. The company has overcome the negative reputation it gained from this event to become a leading coffee chain in China.
Can Starbucks Fend Off Luckin Coffee?
Luckin Coffee may have chosen the perfect time to expand into the U.S. Starbucks has gone through a bout of weakness recently, loosening its grip on the U.S. coffee sector. While it’s hired Cathy Smith as its new Chief Financial Officer to help revitalize the brand, it could take some time for those plans to come to fruition.
Starbucks must tread carefully with Luckin Coffee. The Chinese chain has excelled at quick expansions, allowing it to surpass Starbucks’ store count in China, despite entering the arena nearly two decades after its American rival.
LKNCY vs. SBUX: Which Stock Do Analysts Prefer?
Turning to Wall Street, analysts appear to believe Luckin Coffee could be a major rival for Starbucks. Both companies have consensus Moderate Buy ratings, while LKNCY stock has the higher upside potential at 24.95%, compared to SBUX’s possible 15.27% upside. The average LKNCY price target is $40.61, while the average SBUX price target is $94.74.
