It's been a good week for Tencent Holdings Limited (HKG:700) shareholders, because the company has just released its latest annual results, and the shares gained 2.1% to HK$315. Revenues of CN¥609b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at CN¥11.89, missing estimates by 7.8%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the 47 analysts covering Tencent Holdings are now predicting revenues of CN¥667.1b in 2024. If met, this would reflect a meaningful 9.5% improvement in revenue compared to the last 12 months. Per-share earnings are expected to soar 27% to CN¥15.71. Before this earnings report, the analysts had been forecasting revenues of CN¥667.2b and earnings per share (EPS) of CN¥16.20 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 small dip in their earnings per share forecasts.
The consensus price target held steady at HK$418, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Tencent Holdings analyst has a price target of HK$701 per share, while the most pessimistic values it at HK$288. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Tencent Holdings' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 9.5% growth on an annualised basis. This is compared to a historical growth rate of 13% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.9% annually. 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$418, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Tencent Holdings analysts - going out to 2026, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Tencent Holdings you should be aware of.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.