Chinese coffee retailer Luckin Coffee (LK) - Get Report was rebounding Tuesday after analysts at Morgan Stanley issued a bullish note on the stock and boosted its price target to $42 from $27 a share.
The new price target represents a potential 13% upside from the stock’s previous closing price of $37.12. Shares were rising 6.55% in trading Tuesday to $39.56.
Morgan Stanley analysts are bullish on the company’s recent investments into its tea franchise and the company’s push into unmanned retail, which should lead to lowered costs over time.
The firm estimated the value of the company’s Luckin Tea franchise stores is about $15 a share and the company should be able to penetrate lower-tier cities in China while enabling “efficient network expansion without intensive capital commitments.”
Like many Chinese stocks, Luckin has had a rough week as concerns about the deadly coronavirus have weighed on the entire sector. The stock has fallen more than 17% the past week.
More than 4,500 confirmed cases of the virus have been found in China with neighboring countries in South East Asia also experiencing a handful of infections each. There have been five cases confirmed in the United States.
So far 106 people have died from the virus.