(Bloomberg) — Chinese tech stocks have powered ahead into the new year, but one internet giant has been notably left out with a staggering ten-day loss.
Shares of Meituan have fallen more than 8% this year, trailing all peers in the Hang Seng Tech Index, which has rallied 7.8%. The stock’s losing streak now matches its record in May 2021.
The food delivery giant’s slide is in stark contrast to bullish sentiment on the sector as China fully reopens from Covid restrictions and a sweeping regulatory crackdown draws to a close. Its woes reflect growing competition, as well as pricier valuation and mounting selling pressure from a major shareholder.
While still a dominant one-stop shop for local consumer products, Meituan is facing increased competition from ByteDance Ltd. The TikTok Inc. parent has been taking on Meituan’s core business by attracting restaurant chains and local businesses to its platform.
Some of the latest developments are worrying for Meituan’s investors. ByteDance is reportedly planning to double its gross merchandise value target for local life service business this year, a segment that connects consumers with the best-rated shops. That comes after TikTok’s local app Douyin teamed up with Alibaba Group Holding Ltd.’s Ele.me to send meals ordered on the video platform.
“Douyin has been so devastating to so many other sectors that naturally the first reaction is fear,” said Adam Montanaro, investment director of global emerging markets equities at Abrdn. Douyin being a formidable competitor “does clearly reduce Meituan’s addressable market and potentially caps their pricing power,” he said.
Meituan is also facing selling pressure from Tencent Holdings Ltd., a major stakeholder who is divesting the delivery platform’s shares to other investors. Among those who will receive them, Prosus NV has already announced it will sell the shares.
High valuation is another drag. Priced at 6.8 times its book value, the stock is much more expensive than Tencent, and three times as expensive as Alibaba.
Still, Atlantic Equities analyst Xiao Ai sees some of the concerns as overblown. There is plenty of room for both Douyin and Meituan to grow, with the former better at capturing impulse buying and the latter tailored to more thoughtful purchases, she said.
Meituan’s share-price loss this year has curbed its rebound since an Oct. 24 trough to 33%, less than half the gains of Alibaba at 82% and Tencent at 95%.
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