China-based Meituan Dianping (HK:3690) is still grappling with pressure on its shares, which are currently trading below the IPO price of HK$69. Year-to-date, Meituan stock has lost 14%, resulting in a decline of almost 60% in the last 12 months. Despite this, analysts hold a bullish stance on the stock and predict a huge upside over the next 12 months.
Meituan is a leading e-commerce platform connecting consumers and merchants. The company offers consumer products and other services like food delivery, entertainment, and travel.
The Struggles Continues
Investor confidence in Meituan stock has been rattled due to the company facing stiff competition in the market and experiencing a slowdown in its core takeout business. Investors are also concerned as the company is yet to deliver positive earnings consistently.
During its third-quarter earnings for 2023, the company cautioned about softer Q4 revenue for its food delivery business, citing weak consumer spending. Additionally, the company anticipates a decrease in the number of deliveries.
On January 10, the company initiated its first share buyback program to support the falling share price. However, it did not succeed in addressing investors’ concerns.
Analysts’ Bullish Case
Yesterday, DBS analyst Tsz Wang reiterated his Buy rating on Meituan stock. Wang, however, reduced his price target on the stock from HK$177 to HK$139, predicting a growth rate of over 100% in the next 12 months.
Wang is bullish on the stock, considering its dominant position in China, with a market share of around 70% in the online food delivery space. DBS anticipates a 17% annual growth in food delivery revenue from 2023 to 2025, driven by an expansion of product categories, leading to higher volumes and advertising revenues. During the same period, revenue from the in-store, hotel, and travel segments is projected to experience robust growth of 23% per year.
Prior to that, analyst Ronald Keung from Goldman Sachs also maintained his Buy rating on Meituan shares while reducing his price target from HK$176 to HK$151. The new price indicates an upside of 116.3%.
Keung is optimistic about the company and believes the market is “overly negative” about the impact of competition on its earnings. He also highlighted the huge growth in transaction volumes and profits in its food delivery segment in the last five years.
Is Meituan a Good Stock to Buy?
On TipRanks, 3690 stock has received a Moderate Buy consensus rating from analysts based on 11 Buys, two Holds, and one recommendation. The Meituan share price target is HK$151.18, which shows a growth rate of 116.6% on the current trading price.
Conclusion
Meituan Dianping shares are under pressure as investors are concerned about the slowdown in the company’s takeaway business. That said, most analysts remain bullish on the stock and are optimistic about the company’s long-term growth potential.
