Background
3Q results sent Luckin’s shares up some 35%. We see many cautioning on entering the stock at these levels, but we think otherwise. 3Q was not simply a quarter of gangbuster growth as headlines suggest, and this has significant implications for its valuations.
A look under the hood tells a different story this quarter
Luckin’s shares were down 17% post 2Q’s results, despite posting strong growth in several operating metrics. While quarter-on-quarter revenue growth and (store-level) profit margins were up 90% and 38% respectively, the results depicted a falling return on invested capital as