Meituan Stock Declines Amidst Economic Slowdown

by Warren Seah

Meituan, the prominent Chinese food delivery giant, experienced a significant drop in stock prices on Friday. This decline comes after the company cautioned investors about a potential slowdown in the current quarter, suggesting that the country’s economic challenges may be affecting even its largest corporations.

On the company’s earnings call, CEO Wang Xing addressed the issue, stating that they anticipate a deceleration in food delivery volume during the third quarter. However, he emphasized that this sector is expected to display more resilience compared to other consumption-related sectors. Wang attributed the short-term headwinds to macroeconomic pressures and extreme weather conditions.

Moreover, Wang expressed concerns about the changing consumption power resulting from the current macro environment, particularly for price-sensitive consumers. This shift is anticipated to impact the demand for food delivery to some extent.

In response to Wang’s remarks, Meituan’s shares listed on the Hong Kong stock exchange dropped by over 5%. Despite this decline, it is important to note that the company recorded impressive sales numbers in the second quarter. In fact, revenue surged by 33% to 68 billion yuan ($9.3 billion), surpassing analysts’ expectations of 66.8 billion yuan, according to FactSet data.

Meanwhile, other major Chinese internet companies such as Alibaba and also experienced a decline in their stock prices. Alibaba’s stock fell by 2.3% in Hong Kong, while closed 2.4% lower. Conversely, American depositary receipts (ADRs) remained relatively stable during early premarket trading.

It is worth mentioning that Alibaba and typically refrain from providing specific guidance. Therefore, Wang’s comments carry additional weight and serve as a substantial indication of the potential impact China’s economic struggles may have on third-quarter earnings and beyond.

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