Citi maintains Buy rating on Chagee stock amid increased food delivery subsidies

Investing.com - Citi has reiterated its Buy rating and $43.70 price target on Chagee Holdings (NASDAQ:CHA), citing potential benefits from increased subsidy competition in the food delivery sector. The target represents a 60% upside from the current price of $27.30. According to InvestingPro analysis, the stock appears undervalued based on its proprietary Fair Value model.

The reaffirmation follows a July 6 report in 21st Century Business Herald indicating that Taobao Shangou has increased consumer subsidies for food delivery services starting July 5.

Citi expects the heightened subsidy competition among major food delivery platforms to benefit freshly made teashop operators like Chagee, particularly during the beverage consumption peak season.

The firm has opened a 30-day Upside Catalyst Watch on Chagee stock, signaling its positive outlook on the company’s near-term prospects.

Chagee Holdings, a freshly made teashop operator, stands to gain from the intensified subsidy environment as delivery platforms compete for market share during the high-demand summer season.

In other recent news, Chagee Holdings announced the pricing of its initial public offering (IPO) at $28 per American Depositary Share (ADS), with plans to raise approximately $411.2 million. The IPO involves the sale of 14,683,991 ADSs, and trading is expected to commence on the Nasdaq Global Select Market. Deutsche Bank (ETR:DBKGn) has initiated coverage on Chagee with a Buy rating, citing the company’s strong market position in China’s premium milk tea sector and projecting significant revenue and profit growth from 2025 to 2027. Citi analysts also began coverage with a Buy rating and a price target of $43.70, highlighting Chagee’s leadership in the premium tea drink market and its potential for market consolidation similar to the sportswear sector. Morgan Stanley (NYSE:MS) maintains an Overweight rating on Chagee, with a price target of $37.50, emphasizing the company’s strong brand preference and healthy store operations. Despite some challenges in unit Gross Merchandise Value (GMV), Morgan Stanley expresses confidence in Chagee’s ability to maintain its competitive edge. These developments reflect a positive outlook from major financial institutions regarding Chagee’s strategic growth and market potential.

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