By Jacky Wong 

China's largest takeout company has kept delivering for shareholders despite disruptions from the coronavirus pandemic. Investors now might want to check whether the rally is overheated.

The market value of Hong Kong-listed Meituan Dianping blew past $100 billion after its stock rose 10.4% Tuesday, cementing its position as China's third-most-valuable internet company. Investors seem hopeful that the disruptions caused by the coronavirus pandemic will be short-lived. The company, which runs a super-app providing services including ordering takeout and booking flights, slipped into losses last quarter, after reporting three straight quarters of profit, according to results announced Monday. Meituan's revenue also slid 13% from a year earlier in the first quarter. The results are better than analysts' expectations, and Meituan indicated that its businesses are bouncing back nicely this month.

Meituan's food-delivery revenue last quarter fell 11% from a year earlier even though most people were holed up at home. Average order size rose 14% as customers switched to more expensive restaurants. That is positive for the segment's razor-thin margins. Meituan said that as of mid-May, its food-delivery orders had recovered to 90% of the pre-pandemic level.

Its higher-margin businesses, however, could take longer to recover. Unlike its U.S. peers Grubhub or DoorDash, which rely solely on the low-margin takeout business, Meituan uses its platform to lure its customers into more profitable businesses such as selling hotel rooms or flight tickets. Its in-store, hotel and travel segment was the only business that reported an operating profit last quarter, though margins there slipped, too. Hotel rooms on its platform cater more to domestic travel, which has recovered faster than international. Nonetheless as of May, hotel-room bookings on its platform had reached only around 70% of the level before the pandemic.

Meituan might become profitable again once its revenue resumes growing. But even if the pandemic is no longer a concern, the economic downturn could weigh on discretionary spending, such as travel and dining, for a long time.

Meituan's stock is trading at 47 times next year's earnings, according to S&P Global Market Intelligence. Given that the stock has rallied 36% this year, investors may want to check out for the time being.

Write to Jacky Wong at JACKY.WONG@wsj.com

(END) Dow Jones Newswires

May 26, 2020 06:41 ET (10:41 GMT)