Morgan Stanley: More optimistic about Alibaba in e-commerce, "Gaode Street Sweeping List" will reshape the competitive landscape of local life
Morgan Stanley believes that the "Gaode Street Sweeping List" is a clear signal of Alibaba's renewed efforts in the in-store business, and it is expected that more related services and products will be launched in the future, which is likely to gain a larger share in the local life service market. This move by Alibaba directly targets Meituan and Dianping, and in the short term, it will put pressure on Meituan's profitability, with the latter's long-term profitability in the in-store business expected to drop from 2.5% to 2%
On Wednesday, Alibaba's Amap announced the launch of the world's first user behavior-based ranking list, the "Amap Street Ranking," which is seen as Alibaba's latest move to strengthen its local life services market.
According to news from the Chasing Wind Trading Desk, Morgan Stanley analysts Gary Yu, Joanne Lau, and others pointed out in their latest research report that the model of the "Amap Street Ranking" is highly similar to Meituan's Dianping, and this move is a clear signal that Alibaba is refocusing on in-store business, which will reshape the competitive landscape in the local life services sector.
Analysts believe that Alibaba's expansion in the local services sector may lead to on-demand service competition extending to in-store services, which will further pressure Meituan's profit margins.
Morgan Stanley stated that among China's e-commerce giants, Alibaba is the top choice, and due to the escalating competition, it has lowered its long-term profitability forecast for Meituan's in-store business, expecting that the operating losses in its core local business segment may therefore widen.
Amap Launches Offensive, Reigniting In-Store Business Warfare
Morgan Stanley believes that Alibaba is opening new fronts in its local life strategy by transforming Amap.
The report cites data from Quest Mobile, indicating that Amap, as China's largest navigation application, has nearly 200 million daily active users (DAU), this massive user base provides Alibaba with a natural traffic entry point for in-store services.
This move marks a more complete layout for Alibaba in the local life sector, extending from food delivery and instant retail (express delivery e-commerce) to the more profitable in-store business. The report states that the launch of the "Amap Street Ranking" is just the first step, and more related services and products are expected to be launched in the future.
Meanwhile, Amap has also launched the "Good Store Support Program," which encourages users to consume in-store by issuing over 1 billion yuan in subsidies, hoping to bring an additional 10 million customers daily to offline dining and other service industries.
The report points out that, in conjunction with the simultaneous launch of the 1 billion yuan incentive plan, Alibaba's intention is to quickly activate the consumption potential on the Amap platform, forming a new growth point.
Expansion of Local Life Map, Alibaba's Execution Exceeds Expectations
Morgan Stanley noted that Alibaba has recently shown a strong expansion momentum and execution capability beyond expectations in the local life sector. Starting from food delivery, Alibaba has expanded its business to non-food retail instant delivery and is now further venturing into local services.
Data from the report shows that Alibaba's monthly active users (MAU) in August increased by 25% year-on-year. At the same time, management has also provided clear performance guidance, including a commitment to halve unit economic losses (UE) within 1-2 months, expecting that the express delivery e-commerce business will bring a 2-3% increase in customer management revenue (CMR), and has set a target of achieving a total incremental transaction volume (GMV) of 1 trillion yuan in the express delivery e-commerce business over the next three years.
Based on this, Morgan Stanley maintains its investment estimate for Alibaba in express delivery e-commerce and in-store business unchanged, expecting 35 billion yuan for the second fiscal quarter and 80 billion yuan for the fiscal year 2026.
Morgan Stanley's Top Pick: Alibaba, Meituan's Profitability Expected to Be Impacted
Alibaba's new moves on Gaode Map pose a direct challenge to Meituan's core business.
Morgan Stanley believes that the impact on Meituan mainly manifests in three aspects: increased profit pressure in the short term, lower entry barriers for in-store services compared to on-demand delivery, and intensified competition eroding profit margins.
Based on the above judgment, Morgan Stanley has lowered its long-term profitability forecast for Meituan's in-store business from 2.5% to 2%.
The report further updates the financial forecast for Meituan, expecting its third-quarter core local commerce (CLC) operating loss to reach 10 billion yuan (with instant delivery losses of 15 billion yuan and in-store business profits of 5 billion yuan); for the fiscal year 2025, the expected operating profit for core local commerce is 2.4 billion yuan, a significant year-on-year decline of 95%.
In its investment rating for the Chinese e-commerce sector, Morgan Stanley provided a clear preference ranking: Alibaba > Pinduoduo > Meituan > JD.com.
The report is optimistic about Alibaba's core logic, as its cloud business, recognized as "China's best AI enabler," has shown signs of accelerated growth, while its core e-commerce business's customer management revenue is expected to maintain double-digit growth.
Although competition in local life services is expected to intensify, Morgan Stanley believes that Alibaba, with its technological strength, user base, and capital investment capabilities, is likely to gain a larger share in this rapidly growing market
