Investing.com - Goldman Sachs initiated coverage on Chagee Holdings (NASDAQ:CHA) with a Neutral rating and a price target of $13.60, citing headwinds in its core China market.
The firm set its price target based on a 10x 2026 price-to-earnings ratio. Chagee’s shares rebounded by 15% following first-quarter results that beat market expectations, supported by a narrowing same-store sales decline and cost optimization. Despite the recent bounce, the stock remains down 56.5% over the past year and currently trades at $11.65, well below analyst price targets ranging from $10.99 to $25.09. According to InvestingPro analysis, the stock appears undervalued relative to its Fair Value, landing it on the platform’s most undervalued stocks list.
Goldman Sachs sees limited room for further store expansion in China, which remains the major revenue and profit contributor. The firm said Chagee’s premium positioning and focused category exposure place it in a less favorable position versus other leading brands amid fluid consumption trends and fast-changing customer preferences.
The firm expects an increasing direct-to-consumer revenue mix to reach 29% in 2026 from 12% in 2025, driven by franchised store buybacks in China and overseas expansion. Overseas operations are at the investment stage with a negative contribution to profitability.
Goldman Sachs expects Chagee to report flat non-GAAP net profit this year before entering a mild growth stage with mid-single-digit year-over-year growth as China same-store sales stabilize. The firm said this implies underperformance versus other food and beverage leaders Mixue, Luckin, and Guming, which can generate teens to above 20% earnings compound annual growth rate over the next three years. InvestingPro notes that Chagee holds more cash than debt on its balance sheet, providing financial flexibility during this transition period. The company carries a "GREAT" financial health score on the platform, with investors able to access additional ProTips and comprehensive metrics to evaluate the investment case.
In other recent news, Chagee Holdings Limited reported its first quarter 2026 earnings, which did not meet analysts’ expectations. Despite the earnings miss, the company announced a $150 million share repurchase program, which led to a notable surge in its share value. Additionally, CLSA has initiated coverage on Chagee Holdings with a Hold rating, citing concerns over profit margins. The research firm set a price target of $10.00 for the company’s stock. This valuation is based on an assessment of the company’s core earnings per share projected for 2027. These developments highlight the mixed sentiment surrounding Chagee Holdings in the investment community.
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