We must always bear in mind that the market always prices in the future performance of the company. Going back in time, this means that at the IPO stage, investors already expected Chagee to do whatever it is you are seeing today (new store, new drinks, long queues). The reason why we see the stock is going down, is simply because the market thinks that Chagee will not be able to keep up with its competitors and that eventually, their growth may slow. In other words, they already won investors with a certain set of guidance but they weren’t able to WOW them after they bring them in.
Chagee stores keep opening in Singapore and the waiting time for their beverage products keep going up but their stock price is only going one-way and that’s down. Warren Buffet said to invest in what you know; advocating buying businesses that you understand or use on a daily basis. It sure worked out for him and Coke but will it work out for the modern day investor who choses to long Chagee Holdings Ltd
While Chagee has grown rapidly in the past year, its margins and store count (they call it Tea Houses) remain smaller. Bearing in mind that growth rate has moderated from earlier hyper-expansion levels they are now seeing a period of normalisation as I honestly doubt they are in decline. In contrast, Mixue benefits from cost-leadership scale, Luckin from continued revenue acceleration, and Starbucks from their global diversification and earnings stability.
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