JPMorgan leads Meituan stock downgrades after US$10 billion share sell-off amid growth doubts for Chinese delivery firm

At least 30 brokers including JPMorgan and Morgan Stanley have slashed their 12-month price target by 10 to 49 per cent this week

‘We anticipate a revenue slowdown because management expects consumers to be more cautious and value-oriented,’ Morningstar analyst says

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A group of delivery drivers for Meituan await orders in Beijing on November 16, 2023. Photo: AFP

Published: 6:30pm, 30 Nov 2023

A US$10 billion sell-off in Meituan shares is shaking the confidence of analysts who have been bullish on the Chinese food-delivery company for more than three years. Many cut their upside expectations this week as the stock skidded to a 12-month low.

At least 30 brokers have slashed their 12-month price targets for Meituan by 10 to 49 per cent this week, with four of them downgrading their recommendations. That knocked the consensus target down by 18 per cent from the previous week to HK$160.67, the lowest level since July 2020, according to Bloomberg data.

JPMorgan was the most aggressive, nearly halving its price target to HK$100 from HK$195 and downgrading its rating to neutral from overweight. Morgan Stanley downgraded its recommendation to in-line from equal-weight and slashed its target by a third to HK$120.

“Our lowered valuation reflects our view that margin pressures are likely to linger, compounded by a downward revision of food-delivery growth,” Kai Wang, senior equity analyst at Morningstar, said in a note on Wednesday. He cut the price target by 30 per cent to HK$102 and downgraded the stock to hold from buy.

A woman uses balls to exercise at a park in Beijing on November 30, 2023. Photo: AFP

The wave of downgrades came after Chen Shaohui, Meituan’s chief financial officer, said the company expects revenue growth for its core business to slow this quarter as uncommonly warm weather is likely to reduce meal orders. The company posted a 22 per cent jump in third-quarter revenue, slightly better than expected.