Chagee stock has fallen by 75% since IPO but new stores keep opening? Why?

What exactly is the deal here?

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 [NASDAQ: CHA]?

In this article, I’ll breakdown the reason for the divergence between what is seemingly popular today and the trajectory of their stock price.

Disclaimer: I write without AI because I have the highest respect for your time and attention. In return, please excuse the occasional slang and lingo. I don’t have an A+ in English but I would like to think that I have at least a B in investing.

"Why is it Chagee's stock is going down while, on the surface, its popularity and growth are going to the moon"?

Simply put, the Market has already priced in exactly what you see today.

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.

Fundamentals: Chagee vs Mixue vs Luckin Coffee vs Starbucks

Let’s zoom out a little to compare the fundamentals of Chagee alongside other listed Chinese F&B brands. Here are some observations,

1. Chagee is still considered “small” in terms of both Market Cap and the number of stores. This is bullish for the company in the sense that they are still a fast growing business and nowhere near product stagnation or decline. This is exactly what you see right now with the new store openings and the long wait for their beverages.

2. While the chart shows that Chagee’s recent revenue grow by 20% YoY, there is actually more to it as Chagee grew revenue nearly 200% in 2024. But by 2025, growth had slowed to where it is now. The market is reacting to deceleration, not collapse.

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.

The comparison above highlights a key concern as Chagee remains in a proving phase. It sits between being a high-growth challenger and an established, scaled operator. Although brand momentum and demand is clear, its revenue base, earnings power, and store network still trail larger competitors. As a result, the market is pricing not just its growth, but the uncertainty around whether it can scale profitably and sustainably to match more mature peers.

From Expansion to Earnings: What changed after their IPO?

When Chagee went public in April 2025, they literally went all out with the concept of “striking while the iron is hot”.

The IPO was set at $28, raising approximately $411 million with an valuation of $5.1 billion at listing. That pricing reflected not just investor optimism, but extraordinary historical growth. The reason for this are in their 2024 numbers:

• Net revenue of approximately $1.72 billion, up from roughly $0.64 billion in 2023

• That represents ~167% year-on-year revenue growth

• Gross merchandise value (GMV) of approximately $4.09 billion which grew by ~173% year-on-year

Those are not normal growth numbers.

If Chagee did grow by these numbers year after year, the subject of this article would change. As such, this precisely why the stock price is at current levels because their growth at IPO was orchestrated for that purpose alone. Growth matters but ultimately in public markets, investors want proof that such growth is sustainable.

Chagee: Defining a Rational Entry Point

I’ve never been a huge fan of analyst coverage as it’s hard to trust a forecast when the person making it doesn’t have their own capital on the line. However, I’m clearly the one in the wrong here as analyst research has remained a market staple since the dawn of the stock exchange.

Technicals are also voided here as they are a new ticker with less than 1 year of candlestick formations. You definitely don't need a pro to tell you where this stock is heading.

Popular Brand, Falling Stock: Is this divergence an opportunity?

Chagee’s queues are real. I see the hype everyday and you see the cups everywhere. Their growth is real but ultimately the market does not price popularity, it prices durability. At IPO, investors priced in rapid growth after revenue surged 167% in 2024. Since then, growth has normalised to around 20%. No change in business fundamentals or their day-to-day business but investor expectations did.

At present, Chagee is being judged not on how many stores it opens, but on its ability to quickly scale profitably against larger, more established competitors. My thesis is that if it proves it can convert brand momentum into consistent earnings, the stock can recover. If not, current prices may very much be an indication of fair value.