Meitu stock falls after Goldman Sachs downgrade

Meitu (HKG:1357) shares dropped 4.2% following a downgrade by Goldman Sachs, which cut its rating on the stock to Neutral from Buy.

Goldman Sachs cited fair valuation relative to its coverage as the primary reason for the downgrade, alongside sector de-rating due to potential competition and a longer timeline for AI monetization. The firm slashed its price target to HK$5.1 from HK$10.8 previously, representing a 35% upside potential.

The investment bank noted this upside is uncompelling compared to its Greater China Tech coverage, where Buy-rated names average 96% upside potential.

Goldman Sachs said the company is focused on core scenarios, leveraging last-mile tools to drive user adoption. The firm indicated it would turn more positive on Meitu if the company shows accelerated growth in its paying ratio, driven by three key factors: overseas user penetration with localized products, roll-out of attractive AI image and video features or applications, and expansion to new categories.

The downgrade comes as the broader technology sector faces headwinds from increased competition and uncertainty around the monetization timeline for artificial intelligence capabilities.