Bernstein downgrades Meituan to “market perform” amid margin, expansion risks

Investing.com -- Bernstein has downgraded Meituan to “market perform,” cutting its price target to HK$150, citing intensifying domestic competition and concerns over costly international expansion, in a note dated Tuesday. 

The move follows a partial recovery in Meituan shares as JD scaled back food delivery losses and local governments paused appliance subsidies.

Bernstein analysts said the convergence of e-commerce and food delivery has created structural challenges. 

JD and Alibaba (NYSE:BABA) are using food delivery as a traffic driver, dragging Meituan into a saturated and volatile market. 

While Meituan retains an edge in operational depth and order density, the rise of multi-player competition reduces network efficiency and adds pressure to margins.

The firm expects Meituan to remain dominant in food delivery profit share but sees limited upside. 

Bernstein now projects Meituan’s food delivery profit per order at RMB1.25 in 2025 and RMB1.50 in 2026. 

Non-GAAP net profit is forecast at RMB41.2 billion for 2025 and RMB52.8 billion for 2026, with a 16x 2026E PE multiple underpinning the revised price target.

International expansion has emerged as a growing concern. Meituan’s food delivery unit Keeta is ramping up in Saudi Arabia but is incurring losses exceeding 10% of gross transaction value, largely due to heavy user and rider incentives. 

Despite these losses, Meituan appears poised to expand into the UAE, Qatar, and Kuwait. Job postings tracked by Bernstein show UAE hiring levels similar to Saudi Arabia.

In Brazil, Meituan has over 100 active job listings, indicating preparations for entry into a market dominated by iFood, which holds around 80% market share. Bernstein warned that annual losses could exceed $1 billion if Meituan commits to Brazil at scale.

“While we were happy to defend Meituan in the face of competition fears in the domestic market, Meituan management’s apparent appetite for a multi-front war in the international market strikes us as a driver of considerable new spend,” the analysts said.

Meituan’s current forward PE multiple of 16x aligns with 2024–2025 average levels, reflecting market caution. 

The analysts said the company’s ambitions could impact investor sentiment as international losses rise before stabilizing.

Despite modeling higher growth in Instashopping driven by recent subsidies, Bernstein flagged potential for direct price competition as JD treats this segment as strategically important. 

The analysts noted that food delivery penetration is plateauing, capping future margin expansion.