Based on the latest recommendation compilation for March, of the 37 calls, 13 are ‘Strong Buy’, 23 are ‘Buy’, and only 1 ‘Hold’, with no one saying ‘Underperform’ or ‘Sell’, giving it a high rating of 1.8. Compared with February, there are two more ‘Strong Buy’ calls in March. It can be argued that the various challenges faced by Tencent may have crimped its profit outlook and its valuation multiples. With TCEHY’s outperformance over BABA stock, it is no wonder that some of my friends questioned if Tencent stock is overvalued. The discussion may seem odd considering the big cut in the market cap of Tencent from its peak already. We’d like to share more about how we work and what drives our day-to-day business.
Click the link below and we’ll send you MarketBeat’s guide to investing in 5G and which 5G stocks show the most promise. If that’s not enough, Tencent has proven to be an excellent tech investor, having bought stakes early on in what have become some of the region’s most prominent companies. Hence, summing up all the positive catalysts mentioned in this article, I rate Tencent a good stock to buy. Evaluating whether Tencent is a good stock to buy, sell, or hold, we need to look at both sides of the developments. Earlier in this article, I mentioned the Chinese economy is struggling with the country’s worst Covid-19 outbreak since 2020, inevitably dragging down TCEHY stock in the near term.
Tencent’s ‘League of Legends’ developer Riot Games announces layoffs of 530 staff
To date, games remain Tencent’s primary monetization model–as we estimate more than 40% of the group’s operating income comes from this segment. Tencent should continue to leverage its unrivaled access to user data and financial capital to create innovative, high-quality, and long-cycle games with a mobile-first approach. Given enough time, revenue growth will prove more important to stock returns than multiple https://www.dowjonesrisk.com/ expansion, and companies in both the east and west appear well positioned to further grow revenue. For this reason, I want diversified exposure to compelling growth opportunities in both markets. 3 Wall Street research analysts have issued “buy,” “hold,” and “sell” ratings for Tencent in the last year. The consensus among Wall Street research analysts is that investors should “moderate buy” TCEHY shares.
Their ownership of Supercell and Riot Games also gives them exposure to Clash Royale (#1 strategy), Clash of Clans (#5 strategy), and League of Legends (#28 strategy). Tencent has also partnered with Nintendo to distribute Nintendo’s console and games within China. International gaming revenue now represents 25% of Tencent’s online games revenue and it’s growing faster than domestic games revenue. As of February 29th, there was short interest totaling 3,119,400 shares, a decline of 26.7% from the February 14th total of 4,257,300 shares.
- New Rank-Based ScoringMarketRank™ is calculated by averaging available category scores (with extra weight given to analysis and valuation), then ranking the company’s weighted average against that of other companies.
- Growth deteriorated two notches to D from C+ but Valuation inched up from D- to D and Revisions jumped from F to D+.
- Given that its peers would similarly abandon a growth-at-all-costs mentality, Tencent should be able to maintain its market share despite lower spending.
- Chinese stocks surged on Tuesday amid reports of mooted stimulus plans and a sign that tough draft tech rules could be eased.
- The pressures from both Beijing and Washington even led to various quarters calling Chinese stocks “uninvestable”.
Tencent Holdings Limited was formerly known as Tencent (BVI) Limited and changed its name to Tencent Holding Limited in February 2004. The company was founded in 1998 and is headquartered in Shenzhen, the People’s Republic of China. Tencent’s clever use of its social media platform and intellectual property allows it to share its moat with some of its investments, which dramatically boosts the chance that they will succeed. It’s also very likely that Tencent uses data about which WeChat and cloud apps are gaining popularity to choose which companies to invest in, a huge advantage over most other retail – or institutional – investors. On advertising, Tencent is expecting a growth recovery in late 2022 while new game releases would juice revenues from this year. Its cloud and long-form video businesses are expected to improve on profitability as the company reduces expenses on items like marketing.
Tencent chief says gaming business under threat, catching up in AI
Over the past year, TCEHY stock is down 41% while SE stock is down 56%, despite being up over 40% at one point. This signaled Beijing’s intention to continue protecting the interest of foreign investors. I’m not saying they are altruistic, but it shows they want to attract overseas funding and are savvy (or shrewd, if you prefer) enough to keep investors happy. According to Seeking Alpha’s quant rating, TCEHY is currently a ‘hold’ with a score of 2.87. This isn’t a good sign but looking at the factor grades contributing to the scoring, TCEHY stock has improved from three months ago.
On Friday, China’s central bank announced that it will lower banks’ reserve requirement ratio that determines the amount of deposits banks have to set aside. The move would release 530 billion yuan ($83 billion) of liquidity to spur lending and help businesses. Institutional investors could be comforted by Tencent Holdings Ltd’s solid free cash flow of $17.5 billion and an FCF yield of 3.9%. This is impressive when compared with Sea Limited (SE), affectionately named the Tencent of Southeast Asia and “Baby Tencent” by some market players. There is always the possibility that the government may want more control over internet businesses by curbing monetization, limiting collection of user data, or restricting acquisitions. China’s proposed gaming rules would hit smaller developers more than large ones, while also reducing overall online advertising revenue, according to UBS.
NetEase loses a quarter of its value and Tencent stock skids on new China gaming rule proposal
With the suspension of new games approval lifted, it is a matter of time before we see Tencent’s titles getting approved. Every game title of Tencent being approved would be a share price upside driver for TCEHY. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. 2022 was anticipated to be the recovery year and through mid-February, TCEHY stock established an ascending triangle pattern which is recognized in technical analysis as a bullish chart pattern.
The Chinese government has ousted a top official in charge of regulating the country’s gaming industry, according to reports, in a likely effort to stem the damage from a stock market rout over propos… Tencent Holdings’ Riot Games plans to lay off 530 employees, or about 11% of staff globally, the online gaming company said on Monday in a blog that included a letter to staff from CEO Dylan Jadeja. Beijing has quietly pulled the proposed curbs on the video game industry from the official website, weeks after the draft guidelines wiped tens of billions of dollars off the market value of local tit… Riot Games, the developer of the popular “League of Legends” multiplayer battle game, is joining other tech companies that have been trimming their payrolls with a layoff of 11% of its staff. Tencent halted the development of a highly anticipated mobile game based on Square Enix’s “Nier” franchise in December, according to three people with knowledge of the matter, marking a setback in the… China’s central bank has approved Tencent Holdings’ online payment platform Tenpay boosting its registered capital to 15.3 billion yuan ($2.13 billion), according to a central bank statement on Friday…
Tencent’s 2022 results might have disappointed its longtime shareholders, but make no mistake. But the bigger culprits were external factors such as China’s economic weakness, which was caused in part by that nation’s extended and strict COVID lockdowns. Other Chinese government policies also hurt Tencent’s financials in 2022. For example, its regulatory crackdowns on the online education and tech industries have severely impacted Tencent’s advertising and cloud income. In my previous article titled Is Alibaba Stock A Buy Or Sell After $25 Billion Buyback Announcement?
So there could certainly be further to fall for Tencent too, which is why it’s important to dollar cost average and maintain a diversified portfolio. But I expect that over the long run, Tencent will recover to new highs. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. One was that the company had become gigantic, generating 555 billion yuan ($79.6 billion) in revenue in 2022. It is quite natural for a company of that size to find it challenging to sustain high growth rates.
While the Chinese government’s new direction will not directly weaken Tencent’s competitive advantage (more on this later), it certainly puts its future profitability at risk. Unfortunately, political risks are unavoidable when investing in Chinese companies. Tencent had been a hallmark of consistent and sustainable growth, with an unbroken track record of growth since it went public in 2004. So when the tech company reported that its revenue and operating profit fell by 1% and 13%, respectively, in 2022, investors would have found it difficult to swallow. Like most Chinese stocks, Tencent Holdings (TCEHY -1.15%) has been on a rough ride in recent years. After its share price reached an all-time high of nearly $100 in 2021, it lost almost three-quarters of its value, and it’s still down by more than half.
Based on an average daily volume of 5,650,200 shares, the short-interest ratio is presently 0.6 days. With its dominant market position, Tencent has plenty of opportunities to profit from its captive users. To keep making money from its ecosystem, all it has to do is ensure that it remains the preferred communication platform in China. Fortunately, it is the only game in town, and it could keep that position for a while.
Looking at a historical chart of SPY or EEM, every dip seems like a great buying opportunity. But at the time of the dip, there was always a reason why there could be further to fall, and very few people timed the bottom of the dip perfectly. Upgrade to MarketBeat All Access to add more stocks to your watchlist.
