Why Luckin Coffee Stock Is Falling Today from freemexy's blog

Shares of Luckin Coffee (NASDAQ:LK) declined on Thursday after a key rival warned of heavy losses in the coming quarters. As of 11:33 a.m. EDT today, Luckin’s stock was down more than 15%. To get more news about luckin coffee china, you can visit shine news official website.

It’s been a rough few months for Luckin and its long-term investors. After the Chinese coffeehouse chain disclosed on April 2 that it had fabricated as much as $310 million in sales from the second quarter of 2019 to the fourth quarter, its stock plummeted. In the weeks that followed, Luckin’s CEO and chief operating officer vacated their positions due to their alleged involvement in the scandal, and the company’s chairman will reportedly face criminal charges in China for his role in the fraud. Today, Luckin’s stock price is down roughly 85% from the level it traded at before news of the accounting scandal broke.

But shares are actually up approximately 170% from the lows they reached in May. Some investors are betting that the company will eventually recover from these incidents and that its business still holds value.
Unfortunately, recent announcements by Starbucks (NASDAQ:SBUX) throw that investment thesis into question. Starbucks said on Wednesday that it expects to suffer a sales decline of as much as $3.2 billion in its fiscal third quarter due to the impact of COVID-19. While much of those losses will occur in its core U.S. market, Starbucks projects its same-store sales in China to fall as much as 20% in fiscal 2020.

Although Starbucks said that it expects its comps to “substantially recover” by the end of the fourth quarter, Luckin is in a far weaker financial position and may not be as able to ride out the coronavirus storm. It was already unprofitable before the pandemic, and its financials will likely look a lot worse after we know the full extent of its accounting shenanigans. Starbucks’ warnings come at a terrible time for Luckin and could signal that more pain lies ahead for its investors.

Are you interested in buying Luckin Coffee (NASDAQ:LK) stock? If so, you might want to reconsider that investment. The controversial Chinese coffee shop has seen its share price fall by around 94% year to date because of massive accounting fraud that saw the company fake up to $310 million worth of sales transactions in 2019. The scandal has sent Luckin’s market cap from $12.7 billion in January to around $590 million in early June, and the stock now trades at around $2.50 per share, which is less than 1/10th its earlier valuation.

While that price might look cheap to some investors, it isn’t. Here are three reasons why Luckin Coffee stock could fall even further.