Morgan Stanley maintained its Overweight rating on Meituan with a HKD 120 price target, forecasting the company's Core Local Commerce segment will break even in the second quarter of 2026. The broker sees food delivery unit economics reaching breakeven by 3Q26, with Alibaba's commitment to narrowing quick-commerce losses improving visibility on Meituan's profitability path.
Morgan Stanley maintained its Overweight rating on Meituan with a HKD 120 price target, forecasting the company's Core Local Commerce segment will break even in the second quarter of 2026. The broker sees food delivery unit economics reaching breakeven by 3Q26, with Alibaba's commitment to narrowing quick-commerce losses improving visibility on Meituan's profitability path.
Morgan Stanley said Meituan's Core Local Commerce segment will break even in 2Q26, with an operating loss of RMB 4.3 billion forecast for 1Q26.
"Meituan's profitability roadmap has become clearer after Alibaba's commitment to narrowing quick-commerce losses," Morgan Stanley analysts wrote in a research report published Wednesday.
The broker estimates the instant delivery business will post an operating loss of RMB 8.4 billion in 1Q26, narrowing to RMB 4.4 billion in 2Q26. Food delivery unit economics are projected at negative RMB 1.3 per order in 1Q26 and negative RMB 0.6 in 2Q26, reaching breakeven in 3Q26. For the in-store, hotel and travel segment, Morgan Stanley expects gross transaction value to grow 10 percent year over year in 1Q26, with operating profit of RMB 4.1 billion and a 25 percent margin.
The report comes as Meituan faces intensifying competition from ByteDance's Douyin, which rebranded its group-buying service Suixin Tuan to Douyin Instant Delivery and launched a standalone app. Morgan Stanley maintained its HKD 120 price target, implying upside from the stock's current level. The broker assumes food delivery will achieve unit economics of RMB 1 per order from 2027, with IHT margins recovering to 30 percent by 2030.
For new initiatives, Morgan Stanley estimates an operating loss of RMB 2.7 billion in 1Q26. The overseas business KeeTa will focus on consolidating existing markets this year, with continued improvement in unit economics in Saudi Arabia and sustained profitability in Hong Kong. Operating losses from new businesses in 2026 are expected not to exceed RMB 10 billion.
Meituan shares fell 6.7 percent on Wednesday, according to exchange data.
The maintained rating shows Morgan Stanley's conviction that Meituan's margin trajectory is intact despite competitive pressure from Douyin. Investors will watch the 1Q26 earnings release for evidence of narrowing losses in food delivery and any further competitive moves from ByteDance.
This article is for informational purposes only and does not constitute investment advice.
