China food-delivery war takes $128 billion bite from Alibaba
At least four brokers have cut their price targets by an average of 8% since late June as the latest phase of the yearslong turf war continues to escalate.
HONG KONG – A protracted battle in China's food-delivery market has chopped US$100 billion (S$128 billion) in market value from Alibaba Group Holding, with no end in sight for damage to profits and investor confidence.
Its shares have plunged 28 per cent from a March high in Hong Kong, nearly double the loss in a gauge of Chinese tech peers. Rivals JD.com and Meituan have dropped by similar measures amid daily headlines on government efforts to contain the destructive hyper-competition being dubbed 'involution'.
At least four brokers, including Goldman Sachs Group and HSBC Holdings, have cut their price targets by an average of 8 per cent since late June as the latest phase of the yearslong turf war continues to escalate.
'It could last longer than expected,' said Luo Jing, investment director at Value Partners Group in Hong Kong. 'The players are financially stronger than in the previous round, with more cash and better cash flow positions.'
Alibaba's food-delivery strategy has distracted investors away from the DeepSeek-led AI boom that drove its shares up more than 80 per cent in just two months earlier in 2025. The company has merged its delivery unit into its core business and boosted subsidies since JD.com's formal entry to the space in February.
It's a costly fight. Nomura Holdings estimates about US$4 billion has been burned on discounts in the June quarter alone by Alibaba, Meituan and JD.com. It sees Alibaba dictating the intensity and scale of the coupon war going forward.
Sector leader Meituan said on July 6 that it was going into 'attack' mode versus Alibaba, while JD.com announced a new incentive scheme this week. The companies' extreme moves have drawn much criticism from the government over the potential disastrous impact to the industry, as well as warnings on driver health and food safety.
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Alibaba might sustain a loss of 41 billion yuan (S$7.3 billion) in its food-delivery business for the 12 months through next June, according to Goldman Sachs, equal to about a third of its net income for the fiscal year ended March.
'Aggressive investment in food delivery, insta-shopping will meaningfully damp its near-term earnings outlook,' HSBC analysts wrote in a note this week, cutting their price target for Alibaba by 15 per cent.
The consensus estimate for Alibaba's 12-month forward earnings per share is down about 6 per cent since early May. Analysts are still overwhelmingly bullish, with 44 buy ratings on the Hong Kong shares and no holds or sells. The stock also remains historically cheap at a price-to-earnings ratio of less than 11 times.
In terms of uspide risks, UOB Kay Hian Holdings analyst Julia Pan notes that the government may step in to curb price competition if the market takes a heavy blow and margins get squeezed further.
But investors may remain cautious until a definitive end to the steep discounts, especially if they trigger more earnings downgrades and constrain investment in all-important AI business. BLOOMBERG
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