The annual results for Tencent Holdings Limited (HKG:700) were released last week, making it a good time to revisit its performance. It looks like the results were a bit of a negative overall. While revenues of CN¥609b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 7.5% to hit CN¥11.89 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
After the latest results, the 43 analysts covering Tencent Holdings are now predicting revenues of CN¥666.6b in 2024. If met, this would reflect a decent 9.5% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to soar 29% to CN¥15.91. Before this earnings report, the analysts had been forecasting revenues of CN¥675.6b and earnings per share (EPS) of CN¥16.38 in 2024. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at HK$421, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Tencent Holdings, with the most bullish analyst valuing it at HK$701 and the most bearish at HK$287 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Tencent Holdings' revenue growth is expected to slow, with the forecast 9.5% annualised growth rate until the end of 2024 being well below the historical 13% p.a. growth over the last five years. Compare this to the 15 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 9.1% per year. So it's pretty clear that, while Tencent Holdings' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Tencent Holdings. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at HK$421, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Tencent Holdings going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for Tencent Holdings that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.