Meituan Shares Soar; Earnings Beat Offset Omicron Worries

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By Yifan Wang
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Meituan shares soared on Monday after the food delivery firm’s fourth-quarter earnings beat expectations, even though current wave of Covid-19 infections in China threaten to hurt operations this year.

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Hong Kong-listed shares of the company, China’s third-largest technology giant, were 14% higher at 154.40 Hong Kong dollars (US$19.72) at the midday trading break.

The sharp gains came after the company on Friday posted 31% revenue growth for the December quarter, beating market expectations. Meituan’s results stood out from other Chinese technology giants’ muted performance during the quarter, when weakened consumption and tighter regulations took their toll on the sector. Both Tencent Holdings Ltd. and Alibaba Group Holding Ltd.’s revenue growth slowed to their lowest since the two companies’ respective listings.

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The earnings beat buoyed investor enthusiasm despite Meituan’s guidance for a weaker first quarter this year, after China significantly tightened movement restrictions in several major cities, including Shenzhen and Shanghai, two of Meituan’s largest markets. “Given that these cities contribute meaningfully to our total transaction volume, the continuous COVID control measure will have a greater impact on our primary businesses” in the first quarter, Meituan’s chief executive Xing Wang said in Friday’s earnings call.

This led many analysts to cut their stock target prices. Citi lowered its target to HK$238 from HK$342, while Nomura cut its target to HK$200 from HK$336. Bocom International also trimmed its target to HK$253 from HK$324.

But all three institutions maintained a buy rating on Meituan’s stock and cited the firm’s sticky user base and fast-expanding new businesses.

“We remain positive on Meituan’s long-term potential to expand user base and frequencies in food delivery,” Bocom International said.

Write to Yifan Wang at [email protected]

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Credit: www.marketwatch.com /

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