Morgan Stanley: More optimistic about Alibaba among e-commerce firms, "Amap Street Ranking" will reshape the competitive landscape of the local services industry.

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On Wednesday, AutoNavi, a subsidiary of Alibaba, announced the launch of the world's first ranking list generated based on user behavior—the "AutoNavi Street Scanning List," which is seen as Alibaba's latest move to focus on the local life services market.

According to information from Chasewind Trading Desk, Morgan Stanley analysts Gary Yu, Joanne Lau, and others pointed out in their latest research report that the model of the "AutoNavi Street Scanning List" is highly similar to Meituan Dianping, and this move is a clear signal that Alibaba is refocusing on in-store business, which will reshape the competitive landscape of the local life services sector.

Analysts believe that Alibaba's expansion in the local services sector may lead to competition in on-demand services extending into in-store services, which will further pressure Meituan's profit margins.

Morgan Stanley stated that Alibaba is their top pick among China’s e-commerce giants. In light of the escalating competition, they lowered their long-term profitability forecast for Meituan’s in-store business, expecting the operating loss of its core local commerce segment to widen as a result.

AutoNavi Launches Offensive, Rekindles the In-Store Business Battle

Morgan Stanley believes that Alibaba is opening new fronts for its local lifestyle strategy by transforming AutoNavi Maps.

The report, citing data from Quest Mobile, points out that AutoNavi Map, as China’s largest navigation app, has nearly 200 million daily active users (DAU), which provides Alibaba a natural traffic entry point to enter the in-store services sector.

This move marks a more complete layout for Alibaba in local life, extending from food delivery and instant retail (on-demand e-commerce) to the more lucrative in-store business. The report claims that the launch of the “AutoNavi Street Scanning List” is just the first step, and more related services and products are expected to launch in the future.

At the same time, AutoNavi has also launched the "Flourishing Stores Support Program," encouraging users to shop in stores through over 1 billion yuan in subsidies and other initiatives, hoping to bring an extra 10 million visits per day to offline dining and other service industries.

The report notes that together with the simultaneously launched 1 billion yuan incentive plan, Alibaba’s intention is to quickly activate consumption potential on the AutoNavi platform and form new growth drivers.

Expanding Local Life Map, Alibaba's Execution Surpasses Expectations

Morgan Stanley pointed out that Alibaba has recently shown very strong momentum and execution in expanding its presence in the local life sector. Starting with food delivery, Alibaba has expanded into non-food instant retail delivery and is now venturing further into local services.

The report’s data show Alibaba’s monthly active users (MAU) grew 25% year-on-year in August. Meanwhile, management has given clear performance guidance, including commitments to halve unit economic loss (UE) within 1-2 months, projections that the instant retail business will bring 2-3% growth in customer management revenue (CMR), and setting a target for an incremental transaction volume (GMV) of one trillion yuan for the instant retail business within the next three years.

Based on this, Morgan Stanley maintains its investment forecasts for Alibaba’s instant retail and in-store business at 35 billion yuan for Q2 and 80 billion yuan for fiscal year 2026.

Morgan Stanley Favors Alibaba, Meituan’s Profitability Expected to Be Impacted

Alibaba’s new moves with AutoNavi directly challenge Meituan’s core business.

Morgan Stanley believes the impact on Meituan is mainly threefold: increased short-term profit pressure, in-store services have a lower entry barrier compared to on-demand delivery, and intensified competition erodes profit margins.

Based on this assessment, Morgan Stanley downgraded its long-term profitability forecast for Meituan’s in-store business from 2.5% to 2%.

The report further updated Meituan’s financial forecasts, predicting core local commerce (CLC) operating losses of 10 billion yuan for the third quarter (with a 15 billion yuan loss in instant delivery, 5 billion yuan profit in in-store business); for fiscal year 2025, the operating profit of the core local commerce segment is estimated at 2.4 billion yuan, a year-on-year plunge of 95%.

For investment ratings in the China e-commerce sector, Morgan Stanley gave a clear preference: Alibaba > Pinduoduo > Meituan > JD.com.

The report is optimistic about Alibaba's core rationale since its cloud business, as "China's best AI enabler," has already shown accelerating growth, while its core e-commerce business’s customer management revenue is expected to maintain double-digit growth.

Although competition in local life services will intensify, Morgan Stanley believes that with its technical strength, user base, and financial capability, Alibaba is likely to capture a greater share of this rapidly growing market.

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The above highlights come from Chasewind Trading Desk.

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