Chagee Holdings Plummets 13%: Earnings Shock and Strategic Shifts Spark Investor Frenzy

Summary
• Chagee Holdings (CHA) tumbles 13.07% intraday, trading at $19.125 amid sharp earnings disappointment.
• Q2 2025 GMV surges 15.5% to RMB8.1B, but GAAP net income plummets 87.7% to RMB77.2M.
• New North America leadership appointments signal aggressive expansion, yet costs balloon 41.5% to RMB3.2B.

Chagee’s stock faces a brutal intraday selloff, driven by a stark divergence between operational growth and profitability. The company’s Q2 results highlight a 40.9% teahouse network expansion but reveal a 3.2% operating margin—a sharp decline from 24.6% in 2024. With the stock trading near its 52-week low of $19.00, investors are scrambling to parse the implications of soaring expenses and strategic bets on global expansion.

Earnings Disappointment Overshadows Operational Growth
Chagee’s 13% intraday plunge stems from a stark disconnect between its operational scale and profitability. While GMV rose 15.5% and teahouse count surged 40.9%, GAAP net income collapsed 87.7% year-over-year to RMB77.2M. The company’s operating margin contracted to 3.2% from 24.6%, driven by a 41.5% spike in total operating expenses. Share-based compensation alone cost RMB552.5M, eroding non-GAAP net income to RMB629.8M (18.9% margin). Investors are punishing the stock for prioritizing expansion over profitability, with general and administrative expenses soaring 301.1% to RMB944.6M.

Restaurant Sector Mixed as Chagee Stumbles
The broader restaurant sector remains fragmented, with Starbucks (SBUX) down 0.24% as consumer spending shows early signs of fatigue. Chagee’s collapse contrasts with peers like McDonald’s and Yum! Brands, which have maintained healthier margins despite inflation. However, Chagee’s aggressive North America expansion—led by ex-Starbucks and Dutch Bros executives—signals a high-risk, high-reward strategy. While the sector’s average operating margin hovers around 15%, Chagee’s 3.2% margin highlights its structural challenges in scaling profitability.

Technical Deterioration Signals Short-Term Caution
• MACD: -0.546 (bearish divergence), Signal Line: -0.753, Histogram: 0.207 (negative momentum)
• RSI: 52.28 (neutral but trending lower), Bollinger Bands: $20.77–$23.44 (price near lower band)
• 30D MA: $22.71 (price below key support)

Chagee’s technicals paint a dire picture: a short-term bearish trend with RSI near oversold territory and a breakdown below the 30-day moving average. The stock is testing its 52-week low of $19.00, with Bollinger Bands indicating a potential bounce or further decline. Given the absence of liquid options, traders should focus on key levels: $19.00 (intraday low) and $20.77 (lower band). A break below $19.00 could trigger a test of the $17.00 psychological level. Aggressive short-term traders might consider a bearish play if the stock closes below $19.00, but the lack of options liquidity limits hedging opportunities.

Backtest Chagee Holdings Stock Performance
I have completed the back-test you requested:• Strategy logic – Buy CHA at the next day’s open whenever the prior session shows an intraday drop of 13 % or more (Low vs. previous Close). – Hold the position for a maximum of 5 trading days, then exit (no additional stop-loss or take-profit rules). – Test period: 2010-01-01 → 2025-08-29, price series based on daily open.• Default choices made – Historical window: 2010-2025, to give a sufficiently long sample (can be tightened if you prefer). – Exit rule: 5-day maximum hold, a common short-term mean-reversion horizon in academic literature; feel free to adjust. Please review the interactive report below.Open the module to explore detailed performance statistics, equity curve and trade log. Let me know if you’d like to tweak parameters (e.g., holding period, stop-loss / take-profit) or run additional tests.

Chagee at Crossroads: Profitability or Expansion?
Chagee’s 13% selloff underscores the market’s skepticism toward its expansion-driven strategy. While the company’s GMV growth and North America hires signal ambition, the 3.2% operating margin and $4.04B market cap suggest undervaluation if profitability improves. Investors should monitor the 52-week low of $19.00 and watch for a potential rebound above $20.77 (Bollinger lower band). Meanwhile, sector leader Starbucks (SBUX) down 0.24% hints at broader consumer caution. For now, the path forward hinges on Chagee’s ability to balance growth with margin discipline. Action: Watch $19.00 support and $20.77 for a potential reversal.