Meituan's Potential Long-Term Earnings Recovery Seems to be Overlooked

Dow Jones
Sep 02

0556 GMT - The potential for Meituan's long-term earnings recovery appears to be overlooked by the market, says Morningstar's Chelsey Tam in a note. The Chinese food-delivery platform's earnings are improving as the delivery price war cools but its stock price performance was lukewarm after its 2Q results, likely due to a disappointing 3Q profit outlook, she says. She notes weak macroeconomics and poor weather are weighing on the travel segment, while Meituan is raising its marketing costs in the instore, hotel and travel segments to compete with rival Douyin. Still, "we think the market is overly concerned about Meituan's share loss in the in-store businesses," she says. Morningstar retains its fair-value estimate at 110 Hong Kong dollars, noting Meituan's shares seem undervalued. Shares rise 1.6% to HK$77.85.

 

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