In InvestorPlace’s financial newsletter The Daily 10X Stock Report, which is aimed at delivering to your inbox, every single day, a stock pick that could rise by at least 10x, I alerted subscribers on July 27 that disgraced and beaten-up Luckin Coffee (OTCMKTS:LKNCY), despite all odds, looked like a strong buy with huge upside potential. Since then, Luckin stock surged more than 125% higher.

Needless to say, our subscribers are happy about that one, just as they’re happy that we told them about names like Nio (NYSE:NIO), Plug Power (NASDAQ:PLUG), Kandi (NASDAQ:KNDI) and Digital Turbine (NASDAQ:APPS) back when those were still penny stocks (to read more about the newsletter, click here).

But guess what? This big revival rally in LKNCY stock is far from over.

And today, I’m going to tell you what I told our subscribers back in July: Luckin Coffee, presently valued at less than $1.5 billion, is in the midst of a resurgence that could see this company be worth nearly $20 billion one day.

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That implies another potential 1,000% upside in LKNCY stock.

Of course, the execution risks here are large. They should not be discounted. This stock is not for your lunch money. It’s also run up quite a bit in a short amount of time, and is in technically overbought territory, so there’s no need to rush into Luckin stock today.

But the turnaround thesis here is compelling enough, with enough long-term upside potential, that LKNCY is an attractive, long-term investment opportunity for aggressive, risk-seeking investors.

Without further ado, then, let’s jump in to talking about that turnaround thesis.

A Legitimate, Thriving Business

We all know Luckin Coffee as that Chinese coffee chain which was supposed to be the Starbucks (NASDAQ:SBUX) of China, but got derailed by an enormous fraud in which company executives dramatically overstated revenues and simply fabricated orders.

Ever since that ordeal came to light, Luckin Coffee went from Wall Street darling to penny stock.

But, unlike various Chinese stock frauds before it, Luckin stock is not a pump-and-dump scheme with no substance.

The company still operates 6,500 coffee houses in China, is still the country’s largest retail coffee company and still employs a genius, innovative, small footprint, mobile-ordering-focused business model that is perfectly suited to serve cheap coffee in a quick manner to urban consumers who love their smartphones.

The company’s app is still one of the top 10 most downloaded food and drink apps in China.

Luckin Coffee still grew revenues by 250%+ in 2019, still has more than $1 billion in cash on the balance sheet to weather near-term volatility, and still has an opportunity to grow to 10,000… 20,000… 30,000 or more stores in the long run.

This is a legitimate business with legitimate growth drivers. And legitimate long-term growth prospects.

Insiders just committed fraud for nine months in 2019. Those insiders are now gone, and the company appears ready to honestly grow the business from a clean slate. 

Putting the Fraud in the Rearview Mirror

All the bad stuff that Luckin Coffee had coming its way because of its fraud scandal, has for the most part already happened.

The C-suite has been reshuffled. Bad actors have been removed. The internal investigation into the fraud has wrapped up. Luckin’s Nasdaq de-listing has already happened. The numbers have already been restated. Some fines have already been levied (and to date, they’ve been nothing more than slaps on the wrist).

Meanwhile, it appears like Luckin Coffee is getting back to business as usual.

A quick glance through Weibo (NASDAQ:WB), which is basically the Twitter (NYSE:TWTR) of China, shows that tons of users are regularly posting about Luckin Coffee drinks, with the ostensible implication being that Chinese consumers are still buying lots of Luckin coffee.

Looking ahead, the company is set to report earnings sometime in November, and that will give management an opportunity to provide closure to the fraud scandal, restore investor confidence and enthusiasm and paint an optimistic picture of how the company moves forward from here.

All in all, then, it increasingly appears that Luckin Coffee is putting its enormous 2019 fraud scandal in the rearview mirror and is ready to finally move forward on executing against its enormous growth opportunity in China’s booming coffee market.

China’s Booming Coffee Market

Central to the bull thesis on Luckin stock is that Luckin Coffee finds itself at the epicenter of the booming Chinese retail coffee market.

The idea is simple. Young consumers in China are becoming more and more like their U.S. and European counterparts every day. Recently, this includes an uptick in coffee consumption in China. As young consumers increasingly become the driving force of China’s consumer economy, China’s retail coffee market will go from nascent to enormous by the end of the decade.

In numbers, the idea is also very simple.

There are about 35,000 coffee houses in the U.S. to service roughly 330 million consumers, equating to about 100 coffee houses per million people. While that may seem like a lot, it’s not. Throughout North America and Europe, the U.S. is one of the smallest coffee drinking nations, and therefore, has a relatively low number of coffee houses per capita.

For example, Canada is one of the world’s largest coffee drinking nations. There are over 8,000 coffee shops for about 40 million people, implying 200 coffee houses per million people.

Of course, because of heavy and embedded tea culture, China per capita coffee consumption will forever lag U.S. and Canada per capita coffee consumption. But an increasingly westernized young consumer class will continue to drive rapid growth in China’s retail coffee market, and by the end of the decade, China could very reasonably feature around 50 coffee houses per million people.

At a population of 1.4 billion people, that implies roughly 70,000 coffee houses in China by 2030.

According to Euromonitor, there are less than 20,000 coffee houses in China today.

Thus, this is market which could nearly 4x in size over the next decade, with  Luckin Coffee leading this hyperbolic growth.

Huge Upside for Luckin Stock

With more than 6,500 locations, Luckin is the biggest coffee chain in China in terms of retail locations, and it’s not even close.

Given Luckin’s unique and hyper-scalable business model, Luckin should be able to sustain leadership position in terms of retail locations for the foreseeable future. At present, the company controls about 35% coffee retail unit market share in China. Assuming that share positioning remains at 35%, then in a China retail coffee market that may feature 70,000 shops by 2030, Luckin could be operating around 25,000 coffee shops in China alone.

Throw in some expansion into Southeast Asia and maybe Japan, and I think Luckin could easily operate 30,000 coffee shops by 2030.

Starbucks does about $1.3 million in revenue per U.S. store, which roughly equates to about $775 in sales per square foot. That’s only growing, because of rising coffee demand, population growth and inflation. It’ll hit $1,000 by the end of the decade. Let’s say Luckin does about half of that, or about $500 in sales per square foot. Stores average around 400 square feet, implying average annual unit volumes of $200,000.

On 30,000 stores, that implies revenues of $6 billion.

Starbucks operates around 15% operating margins. Luckin should be able to achieve similar margins at scale, as lower list prices on the coffee are offset by lower labor and rent expenses from operating smaller stores.

Tack a 15% operating margin on $6 billion revenues. Take out 20% for taxes. You’re left with $720 million in net profits. Throw a 26x multiple on that, which is the average forward earnings multiple for SBUX stock — and you get to a potential future market cap for Luckin of nearly $20 billion.

At the Luckin stock price today, the company is valued at less than $1.5 billion.

So, to that end, Luckin has more than 1,000% upside potential from current levels.

The Bottom Line

Wall Street wrote off Luckin Coffee as just another pump-and-dump Chinese stock fraud.

It’s not.

Some investors are starting to warm up to the idea that Luckin Coffee has a realistic opportunity to put its enormous 2019 fraud scandal in the rearview mirror, and very soon, get back to executing on its huge opportunity in China’s booming coffee market.

That’s why LKNCY stock has surged over the past few months.

If management does successfully execute against this enormous opportunity – granted, a huge “if” – then the recent surge in Luckin stock is just the beginning of a much bigger and longer uptrend in which the stock could rise more than 10X.

Of course, this is a very risky investment. It’s not for everyone. But for those with an appetite for risk and looking for big returns, Luckin is worth putting on your radar.