Charlene Liu, an analyst from HSBC, maintained the Buy rating on Tencent Holdings Limited (TCTZF – Research Report). The associated price target is HK$445.00.
Charlene Liu’s Buy rating for Tencent Holdings Limited is based on several key factors. First, Liu highlighted Tencent’s rapid growth from high-margin revenue streams, which allows the company more time to develop their next major product. She also pointed out that Tencent’s earnings are expected to continue to exceed revenues in the near term, with buybacks currently being prioritized as a tool for shareholder return.
Liu also noted the company’s strong cost discipline, particularly in terms of headcount management and marketing spend. Despite a challenging growth outlook for domestic games due to an elongated R&D period, gradual monetization path for new games, and intensifying competition, Liu is confident in Tencent’s ability to meet margin expansion expectations for 2024-25. In addition, the company’s FinTech and Business Services (FBS) are seen as a bright spot, with a promising growth outlook. Finally, Liu sees the current valuation as undemanding at 14x 2024e P/E, compared to a 27% 2024e earnings growth, justifying the new target price of HKD445 (up from HKD425).
According to TipRanks, Liu is an analyst with an average return of -3.0% and a 35.94% success rate. Liu covers the Consumer Cyclical sector, focusing on stocks such as JD, Vipshop, and SJM Holdings.
In another report released today, Bernstein also assigned a Buy rating to the stock with a HK$455.00 price target.
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Tencent Holdings Limited (TCTZF) Company Description:
Tencent is a Chinese Internet giant with businesses and investments in a wide variety of Internet services and contents. Major services include communication and social networking (Weixin/Weixin and QQ), online PC and mobile games, content (news, videos, music, comics, and literature), utilities (email, app store, mobile security, and mobile browser), cloud services, and financial technology. Tenpay in Weixin/Weixin and QQ is a payment solution that enables closed-loop transactions in Tencent’s ecosystems and has been adopted by many third-party partners and offline merchants. Tencent has an aggregate monthly active user base of less than 600 million for QQ and over 1.2 billion for Weixin/Weixin.
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