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 companies spending seems to be a uncommon vivid 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 few slowdown in its predominant 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) at the start of 2023, in accordance 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 nearly 70% of the market share in the mainland, in accordance with 2022 information from analysis agency ChinaIRN.
But competitors has been rising, particularly from Alibaba-owned Ele.me, one other distinguished food delivery firm in China.
“Based on my expertise, Ele.me is extra aggressive [than Meituan] and have extra approaches to giving [discount] coupons,” Feifei Shen, director at The Blueshirt Group and a food delivery person in China informed CNBC.
“Usually, I really feel I can get cheaper costs for my orders on Ele.me,” stated Shen. “Only when I haven’t got a coupon, I’ll take into consideration Meituan.”
Meituan’s share efficiency
For the quarter ended Sept. 30, Alibaba’s native companies phase – 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 amass 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 studies that recommended ByteDance might purchase Ele.me.
Ele.me and Douyin joined hands in August 2022 to permit the food delivery agency’s retailers to succeed in customers of the short-video app.
ByteDance, which told CNBC in February final 12 months that it was testing a sort of food delivery service in China by way of Douyin, reportedly denied it was in talks with Alibaba to amass 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 throughout the firm’s third-quarter earnings name.
“On monetary outlook, we expect This autumn income year-over-year progress for food delivery might be barely decrease than the Q3 progress charge,” he stated.
Following that decision, Meituan’s Hong Kong-listed shares plunged 12% to their lowest since March 2020, in accordance with LSEG information.
Analysts maintain ‘purchase’ scores
Despite macro uncertainties, analysts are nonetheless optimistic on Meituan’s outlook. On common, they’ve a “purchase” ranking with a worth goal of HK$149.34, in accordance with FactSet information.
Fitch Ratings on Dec. 18 revised Meituan’s outlook to constructive, from steady.
“Meituan’s sturdy money stream era in 9M23, which is past Fitch’s forecast, could be sustained, as its profitability has improved because of narrowing losses from the brand new initiatives phase and powerful market positions in core segments,” stated Fitch in a report.
“However, uncertainty stays over the impression on profitability from … competitors from Douyin, which might consequence in working money stream volatility over the following 6-12 months,” Fitch stated.
But specialists have been bearish on ByteDance’s doable acquisition of Ele.me.
“An entry into home food delivery is a frightening problem that yields little or no advantages for ByteDance,” stated Blue Lotus Research Institute in a Dec. 19 report, reiterating its “purchase” ranking on Meituan with a worth goal of HK$118.
“Food delivery is a really closely operations-focused business that requires a number of operational effectivity and (crucially) management consideration,” stated tech research firm Momentum Works in December. “Buying and working a big food delivery platform won’t be the most effective answer for Douyin.”
The complicated food delivery terrain makes it tough for different gamers to pose a formidable problem to Meituan, which is why analysts proceed to favor the market chief.
“The indisputable fact that Ele.me falls a lot behind Meituan in market share might be telling – if you end up not the core of the group, your managers don’t have the identical stage of dedication as in comparison with Meituan, for which success of food delivery is life and loss of life,” tech analysis agency Momentum Works’ Jerry Chao stated.