Morgan Stanley Expects TENCENT's 1Q24 Revenue to Rise 5% YoY

Morgan Stanley predicts a 5% YoY growth in TENCENT's 1Q24 revenue, slightly below market expectations due to weaker gaming and fintech growth. However, advertising revenue remains strong. Gross profit and net profit are forecasted to increase by 18% and 25% YoY respectively, driven by increased share buybacks. TENCENT's aggressive buyback strategy is compensating for the sell-off by major shareholder $Prosus N.V. Sponsored ADR(PROSY.US)$ in 1Q.

Morgan Stanley maintains an Overweight rating on TENCENT, with a target price of $400. Despite slower growth projections, the company's robust buyback initiatives and solid financial performance underpin its positive outlook.

TENCENT repurchased over 51 million shares in 1Q, doubling its 2023 buyback size. This aggressive approach, totaling US$1.7 billion, aims to offset the impact of Prosus' sell-off during the quarter. Year-to-date repurchases nearly match those of the entire FY23. However, repurchases may pause during the blackout period before 1Q results are announced.