Goldman Sachs highlights a pivotal shift for investors tracking Meituan: the market’s debate has moved beyond "when will losses peak" to the more fundamental question—"how much of Meituan’s competitive moat remains intact?"
On December 1, Goldman Sachs released a report maintaining a "Buy" rating on Meituan but lowered its target price to HK$120, reflecting concerns over long-term profitability. The analysis outlines three scenarios: base case (+17% upside), optimistic case (+48%), and pessimistic case (-25%), framing the risk-reward dynamics at current levels. While short-term earnings pressure is evident, Goldman underscores Meituan’s long-term leadership, gradual profit recovery, and new business growth as key reasons for the "Buy" call.
**Shift in Debate Focus**: The market has pivoted from scrutinizing short-term subsidies in food delivery to assessing Meituan’s core business resilience and sustainable margins amid intensifying competition from Alibaba (via Ele.me’s "Quick Delivery") and ByteDance’s Douyin (in-store services).
**Earnings vs. Expectations**: Meituan’s Q3 loss narrowed better than expected, but guidance for heavy Q4 food delivery losses, margin compression in in-store services due to competition, and ongoing investments in instant commerce and overseas ventures have sparked concerns.
**Bull vs. Bear Views**: Bulls argue Meituan’s premium user base and strong cash reserves position it to win a war of attrition. Bears fear rivals’ prolonged, loss-making aggression could erode margins, echoing past e-commerce disruptions.
**Mixed Results with Silver Linings** Goldman notes Meituan’s Q3 adjusted operating loss of RMB17.5B beat its RMB18.8B estimate, with faster-than-expected narrowing in instant commerce and new business losses. Initial market reaction was negative due to cautious forward commentary, but positives emerged:
- **Instant Commerce Losses Peaked**: Q3 marked the trough; reduced post-"Double 11" subsidies should narrow Q4 and Q1 2026 losses. - **Unit Economics Lead**: Meituan’s scale and user quality ensure superior efficiency. Goldman estimates Q3 per-order loss at RMB2.6 vs. Alibaba’s RMB5.2. - **Overseas Profitability**: Keeta, launched in Hong Kong in May 2023, achieved monthly profitability by October 2025—29 months ahead of plan, showcasing execution strength.
**Base Case: Leadership Intact but Lowered Profits (+17%)** Goldman’s HK$120 target assumes: - **Food Delivery Margin Cut**: Long-term EBIT/order trimmed from RMB0.8 to RMB0.7 amid a stronger No. 2 player (Alibaba). - **In-Store Margin Pressure**: Competition from Douyin and Amap pushes long-term in-store/hotel/travel (IHT) margins down to 27% vs. 30% target. - **Share Recovery**: Irrational subsidies (Q3 industry losses hit RMB70B) normalizing may help Meituan recapture low-value orders. High-value user retention boosts ROI. - **Undervalued Potential**: Instant commerce (1P+3P model) and globalization (Keeta) growth underappreciated.
**Optimistic Case: Unshakable Moat (+48%)** HK$152 hinges on: - **Moat Depth**: Even at Q3’s peak competition, rivals failed to dent Meituan’s core users or No. 1 position, proving its first-mover edge. - **Capital Firepower**: Meituan’s net cash supports a prolonged battle, straining rivals. Q3 instant commerce daily loss was RMB200M vs. Alibaba’s RMB400M, pressuring Alibaba’s profits. - **Rival Pivot**: Alibaba may reallocate subsidies to core e-commerce (vs. Douyin) or AI, easing "Quick Delivery" losses.
**Pessimistic Case: Multi-Front Battles (-25%)** HK$77 risks include: - **Endless Subsidies**: If Alibaba ties "Quick Delivery" to core e-commerce synergies, Meituan’s margins face prolonged pressure. - **Narrowing Unit Economics**: The per-order profit gap with Alibaba may halve to RMB1.3 by December, threatening valuation. - **In-Store Disruption**: Douyin’s local services GTV surged 60% to RMB800B in 2025 vs. Meituan’s 24% (RMB1.2T), mirroring e-commerce’s history of leader erosion. - **AI Threat**: Alibaba’s Tongyi Qianwen/Quark and ByteDance’s Doubao could evolve into super-apps, disrupting vertical players like Meituan.
Goldman concludes that despite unprecedented competition and near-term headwinds, Meituan’s leadership, execution, and depressed valuation offer investment merit. The battleground now is proving the depth and durability of its moat across multiple fronts.
Comments