Editor’s note: This column is part of our Best Stocks for 2020 contest. Larry Ramer’s pick for the contest is Luckin Coffee (NASDAQ:LK). It was written prior to the news that Luckin Coffee allegedly fabricated its sales. Given these allegations, all investors should approach this stock with great caution.]

With stocks entering a bear market this year amid the outbreak of the coronavirus from China, most equities have gotten hammered. Luckin Coffee, (NASDAQ:LK) China’s rapidly growing coffee shop business, hasn’t escaped the carnage. LK stock has tumbled 35% so far this year.

Yet in recent weeks, things have started to look better for LK stock.

China’s workers are returning to their jobs. For example, this tweet from China Daily stated that workers from Hubei province, where the coronavirus originated, are going back to their positions. And on March 26, Wired reported that China is getting back to work, as “factories are restarting, stores are reopening, and people are venturing outdoors.”

As Chinese workers return to their jobs, they will have more money to spend, and more consumers will want coffee to “charge their batteries” in the morning. Both of those trends, of course, will be very positive for LK stock.

Everyone Is Bullish on LK Stock

On Feb. 13, Luckin disclosed that, with China closing down amidst the coronavirus epidemic, it expected its first-quarter revenue to come in 50% below its original guidance. However, the retailer said it still expected to break even in Q3 and did not make any changes to its 2021 outlook. And at that point, the retailer did not expect the country to fully return to work until May or June, a view that has subsequently proven to be conservative.

So, Luckin could very well generate a meaningful profit in Q3. A crossover into profitability should provide a positive catalyst for LK stock.

In February, KeyBanc analyst Eric Gonzalez contended that Luckin’s forecasts were realistic. He added that the company’s vending machine initiative was rolling out at the right time. I’ve also been very bullish on the vending machines —  they are the ultimate social distancing retail strategy.

Others have noted that the vending machines give the company a low-cost means of expanding its presence. Gonzalez kept a $56 price target and an “outperform” rating on LK stock.

On March 25, Melvin Capital disclosed that it had increased its stake in Luckin to 5.2% from 3.5% at the end of last year. Although Melvin Capital has only been around about six years, it has had a good track record. Its manager, Gabriel Plotkin, was a disciple of well-known billionaire investor Steven Cohen, and as of a year ago, its portfolio was worth an impressive $22 billion. In 2018, Forbes identified Plotkin as one of the top-earning hedge fund managers.

Entering E-Commerce

Luckin is apparently adding another huge weapon to its arsenal. Specifically, the company has built an e-commerce business that will operate through its own app and the extremely popular Chinese social media app, WeChat.

Luckin reportedly plans to sell “snacks, nuts, and mugs” through the app. It will also offer goods like Apple’s (NASDAQ:AAPL) headphones, hand sanitizers and canvas bags.

Of course, e-commerce is growing extremely rapidly in China, so the initiative is another promising effort by Luckin.

The Bottom Line on LK Stock

China appears to have largely returned to business as usual, and Luckin has said that it will be profitable in the third quarter.

The company has multiple initiatives with very high potential, and Melvin Capital’s decision to significantly increase its stake in LK stock greatly increases my confidence in the name. As China continues to fight off the coronavirus and make a business rebound, Luckin is set to be one of the best stocks for 2020.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks and Snap. You can reach him on StockTwits at @larryramer. As of this writing, Larry Ramer owned LK stock.