Goldman Sachs predicts: The key controversy in the market regarding Meituan shifts to "how much of a moat is left?"

Goldman Sachs believes that for investors focusing on Meituan, it is essential to understand a core shift: the market's debate is no longer about "when will losses peak," but rather a deeper question of "how much of Meituan's moat remains?"

According to Chasing Wind Trading Desk, on December 1st, Goldman Sachs released its latest report, maintaining a "Buy" rating on Meituan but lowering the target price to HKD 120, reflecting concerns about long-term profitability. The analysis centers on three possibilities: the base case (+17% upside potential), the optimistic case (+48%), and the pessimistic case (-25%), which clearly outlines the risks and returns investors face at the current price level. While short-term profitability pressures are a fact, long-term leadership, gradually recovering profitability, and new business growth are key reasons for Goldman Sachs to maintain its buy rating.

• Core Shift in Debate: The market has shifted from focusing on the short-term subsidy war in the takeaway business to assessing Meituan's defensive capabilities and long-term profitability in the face of strong competitors like Alibaba (through Ele.me's "Express Delivery") and Douyin (in-store business).

• Performance vs. Expectations: Meituan's third-quarter losses were better than expected, but the company still guided for significant losses in the fourth quarter's takeaway business, pressured profit margins in the in-store business due to competition, and ongoing investments in instant retail and overseas operations raised market concerns.

• Bull vs. Bear Debate: Bulls argue that Meituan, with its high-quality user base and strong cash reserves, is well-positioned to win in a war of attrition; bears worry that if competitors invest recklessly over the long term, it will continue to suppress Meituan's profit margins, potentially repeating the history of disruption seen in the e-commerce industry.

Mixed Performance, but Positive Signals Emerge

Goldman Sachs pointed out that Meituan's adjusted operating loss for the third quarter was RMB 17.5 billion, better than Goldman Sachs' expected loss of RMB 18.8 billion. Notably, the losses in instant retail and new businesses narrowed more than expected.

Nevertheless, the market's initial reaction was somewhat negative, primarily due to the company's cautious comments about the future. However, Goldman Sachs also highlighted several positive signals that cannot be ignored:

1. Instant Retail Losses Have Peaked: The third quarter marked the peak of losses, and with the reduction in subsidy intensity after "Double Eleven," losses are expected to narrow in the fourth quarter and the first quarter of next year.
2. Leading Unit Economic Model: Meituan's economies of scale and high-quality user base have allowed it to maintain leading efficiency even in the subsidy war. Goldman Sachs estimates that Meituan's loss per order in the third quarter was about RMB 2.6, while Alibaba's "Express Delivery" business incurred a loss of up to RMB 5.2 per order during the same period.
3. Clear Path to Profitability in Overseas Business: Its overseas brand Keeta launched in Hong Kong in May 2023 and achieved monthly profitability by October 2025, exceeding the original plan, demonstrating its strong execution capability.

Base Case: Leadership Position Solidified, but Profit Expectations Downgraded (+17% Upside Potential)

Goldman Sachs' base case forms the basis for its target price of HKD 120, with the following core assumptions:

• Long-term profit downgrade for takeaway business: Although Meituan will continue to maintain its leadership position in China's local service market, facing a stronger second place (referring to Alibaba's "Kuaisong"), its long-term average EBIT (Earnings Before Interest and Taxes) per order will be downgraded from the previously expected RMB 0.8 to RMB 0.7.
• Pressure on in-store business profit margins: Due to competition from Douyin and Amap, the long-term profit margin expectation for in-store, hotel, and tourism (IHT) businesses has been downgraded from the company's target of 30% to 27%.
• Market share will recover: Goldman Sachs believes that as the irrational subsidy war (Goldman estimates industry losses could reach RMB 70 billion in the third quarter) normalizes, Meituan has the capability to regain some of the market share lost in low average order value segments. Its strategy is to protect high-value users, which helps improve return on investment and user lifetime value.
• Underestimated potential: The market may underestimate Meituan's growth potential in instant retail business (1P+3P model) and globalization (represented by Keeta).

Optimistic scenario: An unbreakable moat and strong capital (+48% upside potential)

To reach an optimistic valuation of HKD 152, the following conditions need to be validated:

• Moat is strong enough: Even during the third quarter when competition was fiercest and losses peaked, the second place did not substantially shake Meituan's core user base and market leadership position. This proves its first-mover advantage and the strong barrier of user experience.
• Capital strength crushes competitors: Meituan has ample net cash to support a prolonged battle, which will have a huge impact on competitors' financial statements. Goldman Sachs sharply pointed out that Meituan's instant retail business had an average daily loss of about RMB 200 million in the third quarter, while Alibaba's "Kuaisong" business had an average daily loss of up to RMB 400 million during the same period. This puts tremendous pressure on Alibaba Group's profits.
• Competitors may shift strategy: There is a view among investors that Alibaba may eventually refocus its subsidy budget on its core e-commerce business (to respond to the rise of Douyin e-commerce) or shift to more strategically significant AI fields, rather than continuing to bleed in the "Kuaisong" business.

Pessimistic scenario: Continuous bleeding under multi-front warfare (-25% downside potential)

If the stock price falls to HKD 77, it may be triggered by the following risk factors:

• Competitors continue to "burn money": If Alibaba finds that the "Kuaisong" business has a sufficiently good cross-selling effect on its core e-commerce (Taobao-Tmall), it may be willing to endure losses for a long time. This will lead to long-term suppression of Meituan's takeaway and in-store business profits.
• Narrowing profit gap per order: There are signs that the unit economic model gap between Meituan and Alibaba's "Kuaisong" is narrowing. Goldman Sachs predicts that the profit gap per order between the two may shrink from RMB 2.6 in September to RMB 1.3 in December. If this trend continues, it will seriously threaten the long-term valuation of Meituan's takeaway business
• In-store business repeating the e-commerce path: Investors are concerned that Meituan's in-store, hotel, and tourism (IHT) business may experience a similar trajectory to the e-commerce industry—once leading players (such as Taobao-Tmall) are facing long-term market share loss and declining profit margins due to the continuous emergence of new entrants. Douyin's local life GTV is reported to grow by 60% this year to RMB 800 billion, while Goldman Sachs estimates Meituan's IHT business GTV growth at 24% to RMB 1.2 trillion, with strong momentum from challengers.
• Disruption risk from AI entry points: Competition from AI applications such as Alibaba (Tongyi Qianwen/Quark) and ByteDance (Doubao), if they ultimately evolve into super entry points capable of providing local services and comprehensive consumption, could disrupt today's market landscape dominated by vertical applications.

Goldman Sachs believes that despite Meituan facing unprecedented intense competition and short-term profitability pressure, its leadership position in core business, strong execution capabilities, and significantly adjusted stock price still provide investment value at current levels. The key going forward will be whether Meituan can prove the depth and resilience of its "moat" on multiple battlefields