G Sachs Trims TENCENT TP to $428, Rating Buy
Goldman Sachs said in a research report on the recent retreat of TENCENT shares, outlining several recent investor concerns. This included worries about slowing YoY growth of in-game revenue, which the broker expected to grow at 9% YoY. The market has also recently lowered its forecast for TENCENT's advertising revenue due to the uneven pace of the macroeconomic recovery.
At the same time, the outlook for TENCENT's cloud business growth in 2Q was weak, while its pace of releasing its to-consumer generative AI applications was relatively slow. $Prosus N.V. Sponsored ADR(PROSY.US$ is also slated to continue divesting its stake in Tencent at a rate of 2-3% per year.
The broker expected TENCENT's total revenue, adjusted operating profit and adjusted net profit to grow 12%, 31% and 37% YoY respectively in 2Q. This was mainly due to YoY growth in the gaming, advertising, financial technology and cloud computing businesses, as well as effective cost control.
Goldman maintained its Buy rating on TENCENT and lowered its target price from $443 to $428. Revenue forecast for 2023-25 is expected to decline by 0.5%-0.8%, but adjusted operating profit is expected to remain largely flat.
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