Breakout Stocks Corona Virus Stocks
Chinese cafe chain Luckin Coffee (OTCMKTS:LKNCY) has been in all sorts of trouble in the past few months. However, in recent days, there have been some recent developments that might make the Luckin stock a more palatable proposition for investors. That being said, the company is still riddled with scandals and it is important for investors to take a closer look.
| Shrooms To Go – Urban Farmers – Should You Buy This Stock |
| Pandemic Play – Dillards Department Store Soars Ahead – Buffett Sniffing Around ! |
Situation at Luckin
The company had been rocked by an accounting scandal earlier this year, however, Luckin managed to get away with a fine of only $9 million from the regulatory body in China.
While that may be a positive, investors need to keep in mind that the company will need to contend with a class-action lawsuit at the United States District Court for the Southern District of New York.
The company’s legal problems in China however seem to have eased up somewhat and it is now working on growing its sales yet again from its existing base of customers. Things are looking better than they were a few months back when it seemed that the stock was untouchable.
| Vegas Winners Rolls Dice – Coming Soon – Buy This Stock ? |
| Hot Stock Daily Says Watch This Beverage Stock |
Important Steps
The company may have taken certain steps to repair its business and reputation; however, it could take a long time before it can win back the trust of American investors. Instead, Luckin has decided to continue to boost its sales so that investors eventually take notice.
Earlier, the company had been focused on expanding the number of stores, but that strategy has now been discontinued. Now, Luckin is looking to focus on the existing customer pool for growing its sales.
Cash Burn
Despite the recent developments, it is important for investors to look a little deeper into Luckin. The company burned through as much as $700 million from the fourth quarter of 2019 up until the second quarter of 2020.
On top of that, it is left a cash balance of only $780 million and hence, it is going to be tough for Luckin to sustain its marketing push for higher sales.
Conclusion
It is also equally important to point out that there have been changes at the top after the accounting scandal blew up on the company’s face.
That is also expected to be a factor that might make investors a bit circumspect. The company may have made some right moves but the cash burn and the class action lawsuit still hanging over its head. Hence, the future of the company remains a bit uncertain at this point.
Neither PSN nor its owners, members, officers, directors, partners, consultants, nor anyone involved in the publication of this website, is a registered investment adviser or broker-dealer or associated person with a registered investment adviser or broker-dealer and none of the foregoing make any recommendation that the purchase or sale of securities of any company profiled in the PSN website is suitable or advisable for any person or that an investment or transaction in such securities will be profitable. The information contained in the PSN website is not intended to be, and shall not constitute, an offer to sell nor the solicitation of any offer to buy any security. The information presented in the PSN website is provided for informational purposes only and is not to be treated as advice or a recommendation to make any specific investment. Please consult with an independent investment adviser and qualified investment professional before making an investment decision.