A food delivery courier for Meituan in Beijing, China, on Tuesday, Aug. 22, 2023. A surge in gross sales anticipated for Meituan could also be a catalyst to its shares, which have outperformed friends as providers spending seems to be a uncommon vibrant spot amid deepening investor pessimism. Source: Bloomberg
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Since the start of 2023, Chinese food delivery chief Meituan has lost a staggering $82 billion in market capitalization, as fears over rising competitors and a warning from its administration a couple of slowdown in its important food delivery business have spooked traders.
The tech big’s market cap has tumbled almost 60% to 441.06 billion Hong Kong {dollars} ($56.4 billion) from HK$1.08 trillion ($138.2 billion) initially of 2023, in keeping with LSEG information.
Meituan’s inventory has plummeted almost 85% from its all-time excessive of HK$460 (about $58.91) hit on Feb. 18, 2021 to HK$70.55 on Jan. 9, LSEG information confirmed.
The firm nonetheless dominates China’s food delivery trade, with virtually 70% of the market share in the mainland, in keeping with 2022 information from analysis agency ChinaIRN.
But competitors has been rising, particularly from Alibaba-owned Ele.me, one other outstanding food delivery firm in China.
“Based on my experience, Ele.me is more aggressive [than Meituan] and have more approaches to giving [discount] coupons,” Feifei Shen, director at The Blueshirt Group and a food delivery person in China instructed CNBC.
“Usually, I feel I can get cheaper prices for my orders on Ele.me,” stated Shen. “Only when I don’t have a coupon, I will think about Meituan.”
Meituan’s share efficiency
For the quarter ended Sept. 30, Alibaba’s native providers section – which incorporates food delivery – saw revenue increase by 16%, pushed by sturdy progress in each Ele.me and its mobility business Amap, the tech big stated.
Chinese media reported on Dec. 19 that ByteDance-owned short-video app Douyin was in talks with Alibaba to accumulate its Ele.me food delivery business, inflicting Meituan shares to drop.
Hong Kong-based Blue Lotus Research Institute stated the autumn in Meituan shares was due to experiences that instructed ByteDance may purchase Ele.me.
Ele.me and Douyin joined hands in August 2022 to permit the food delivery agency’s retailers to achieve customers of the short-video app.
ByteDance, which told CNBC in February final yr that it was testing a sort of food delivery service in China through Douyin, reportedly denied it was in talks with Alibaba to accumulate Ele.me.
Meituan shares have been additionally hit after the company warned of a slowdown in its food delivery business in the fourth quarter of 2023, regardless of reporting positive results in the earlier quarter.
Several components together with the macro setting and the nice and cozy climate have been affecting delivery volumes, CFO Shao Hui Chen stated in the course of the firm’s third-quarter earnings name.
“On financial outlook, we think Q4 revenue year-over-year growth for food delivery will be slightly lower than the Q3 growth rate,” he stated.
Following that decision, Meituan’s Hong Kong-listed shares plunged 12% to their lowest since March 2020, in keeping with LSEG information.
Analysts maintain ‘purchase’ rankings
Despite macro uncertainties, analysts are nonetheless optimistic on Meituan’s outlook. On common, they’ve a “buy” ranking with a value goal of HK$149.34, in keeping with FactSet information.
Fitch Ratings on Dec. 18 revised Meituan’s outlook to constructive, from steady.
“Meituan’s strong cash flow generation in 9M23, which is beyond Fitch’s forecast, can be sustained, as its profitability has improved due to narrowing losses from the new initiatives segment and strong market positions in core segments,” stated Fitch in a report.
“However, uncertainty remains over the impact on profitability from … competition from Douyin, which could result in operating cash flow volatility over the next 6-12 months,” Fitch stated.
But specialists have been bearish on ByteDance’s attainable acquisition of Ele.me.
“An entry into domestic food delivery is a daunting challenge that yields very little benefits for ByteDance,” stated Blue Lotus Research Institute in a Dec. 19 report, reiterating its “buy” ranking on Meituan with a value goal of HK$118.
“Food delivery is a very heavily operations-focused business that requires a lot of operational efficiency and (crucially) leadership attention,” stated tech research firm Momentum Works in December. “Buying and operating a large food delivery platform might not be the best solution for Douyin.”
The complicated food delivery terrain makes it troublesome for different gamers to pose a formidable problem to Meituan, which is why analysts proceed to favor the market chief.
“The fact that Ele.me falls much behind Meituan in market share is probably telling – when you are not the core of the group, your managers do not have the same level of commitment as compared to Meituan, for which success of food delivery is life and death,” tech analysis agency Momentum Works’ Jerry Chao stated.