Not Enough U.S. Cash Burning IPOs for You? Here Comes China’s Luckin Coffee | Value Investing News

Not Enough U.S. Cash Burning IPOs for You? Here Comes China’s Luckin Coffee

  • Just as U.S. investors are trying to make sense of the Uber (UBER) and Lyft (LYFT) IPOs, both disastrous for those buying at the offer prices, on Friday we will get a U.S. listing of Chinese-operated, Cayman Island-incorporated coffee upstart Luckin Coffee.
  • All one can do is estimate what they think margins could ultimately be based on the business model, assume long-term success, and calculate an imputed price-to-sales ratio worth paying today given certain growth assumptions.
  • That valuation equates to an EV/sales ratio of 3x, which based on 2020 revenue projections could yield a per-share fair value in the $30 ballpark (vs today’s quote of $40).And don’t even ask me to guess what Luckin Coffee’s margins could be.
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