Analysts are urging investors to stay away from shares of Meituan Dianping, with the company's stock in the doldrums since its initial public offering last September.
In fact, one firm sees more than 30 percent downside for Meituan Dianping's stock from its current levels.
In a note published March 19, analysts at China Tonghai Securities initiated coverage with a price target of 34.33 Hong Kong dollars per share — that's more than 31 percent lower than the stock's closing price on Wednesday.
"We initiate coverage of Meituan Dianping (MTDP) with a non-consensus Sell rating, as the market does not appear to be fully discounting the negative knock-on effects from the escalating competitive pressures across its segments and dependence on subsidies which result in a longer-than-expected turnaround," the analysts said.
Others, who did not have a price target for the company selling online services from food delivery to ticketing, said the company is difficult to value.
"I think Meituan Dianping is hard to value because it isn't profitable, and its losses are widening," Leo Sun, tech and consumer goods specialist at The Motley Fool, told CNBC in an email. "I wouldn't necessarily call it 'overvalued' at less than 4 times last year's sales, but it could certainly go lower if it fails to narrow its losses."
"I do think Meituan has a lot to prove to justify their valuation," said Jackson Wong, associate director at Huarong International Securities.
Meituan Dianping did not immediately respond to a request for comment from CNBC.
Since rising more than 5 percent on the day of its initial public offering in 2018, Meituan Dianping's stock has consistently traded at levels below its debut day closing price of 72.65 Hong Kong dollars per share. It closed at 50 Hong Kong dollars on Wednesday.
The company currently faces challenges on multiple fronts in sectors such as food delivery and bike-sharing, with its recent results showing that fourth-quarter operating losses more than doubled.
"(Meituan) faces tough competition in the food delivery space from Alibaba's Ele.me, and a pricing war will likely prevent Meituan from becoming profitable for the foreseeable future," Sun said. Ele.me is Chinese tech giant's Alibaba's competing food delivery platform.
According to Wong, Meituan needs to "grow a lot faster and gain market share while (juggling) cutting administration and selling expenses amid the fierce competition and dynamic changing market taste" in China.
"I wouldn't recommend to buy the stock at the moment before I can see much better operation(s) data," Wong said.
As of Thursday, Meituan Dianping's market capitalization was about 280 billion Hong Kong dollars, or roughly $36 billion.
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