Investing.com -- Citi analysts cut Delivery Hero AG (ETR: DHER ) stock rating to Sell from Neutral and trimmed the price target €28 to €26, reflecting concerns over the intensifying competition in the Middle East and North Africa (MENA) region, particularly from Meituan-backed Keeta in Saudi Arabia.

Delivery Hero shares slumped 7% in European trading Wednesday.

Through aggressive expansion since its launch in September 2024, Keeta has been capturing significant market share, which could present a long-term challenge to Delivery Hero's profitability and growth.

Keeta's rapid growth in Saudi Arabia has been propelled by a series of aggressive promotions, including vouchers for new users, free delivery, an on-time delivery promise, and discounts.

As a result, the app has become one of the most downloaded in the country, with January 2025 downloads surpassing those of Delivery Hero's HungerStation and competitor Jahez by more than threefold.

By the end of January 2025, Keeta's daily active users were comparable to those of Delivery Hero, and it held approximately 30% of the app session time share, Citi analysts said, citing Sensor Tower data.

Although Delivery Hero's claim that Sensor Tower data overstates Keeta's market share, Citi believes the figures are “directionally significant.”

“Given Keeta targets lower priced consumers with its coupon-heavy customer acquisition, its gross merchandise volume (GMV) share is likely to be materially lower than traffic share,” analysts led by Monique Pollard said in a note.

Still, the growth momentum and app ratings suggest that Delivery Hero's margins in Saudi Arabia may be at risk, analysts added.

“Meituan's pace of growth, its app ratings, quick expansion in 2 new cities and prior success in Hong Kong suggest DHER's Saudi margins may be at a peak; we see risk of growth deceleration as DHER potentially cedes some share to an aggressive new entrant,” they noted.

Citi anticipates margin pressures for Delivery Hero as Meituan (HK: 3690 ) is expected to incur losses of around $270-400 million in Saudi Arabia in 2025, as it continues to invest heavily to gain market share.

By July 2025, Meituan aims to cover approximately 80% of the Kingdom (TADAWUL: 4280 ) of Saudi Arabia. In response, Delivery Hero is expected to defend its market share, leading to a forecast of slightly reduced EBITDA in 2025 and only a slight growth in 2026.