Tencent Holdings Limited TCEHY Stock Price, Quote & News

what is tencent stock

Tencent blamed that slowdown on China’s regulatory crackdown on online education, gaming, and internet service companies, all of which had advertised heavily on WeChat and Tencent’s streaming media services. The online games segment consists of some China-specific titles but also many well known international titles like PUBG Mobile (#9 strategy game on the USA App Store). Their ownership of Supercell and Riot Games also gives them exposure to Clash Royale (#1 strategy), Clash of Clans (#5 strategy), and League of Legends (#28 strategy). Tencent has also partnered with Nintendo to distribute Nintendo’s console and games within China. International gaming revenue now represents 25% of Tencent’s online games revenue and it’s growing faster than domestic games revenue.

what is tencent stock

Tencent is barely growing, yet its stock still trades at 20 times next year’s earnings. Therefore, I can’t consider it a value play — or an attractive investment at all — when so many other high-growth stocks are still on sale. As Tencent’s revenue growth stalls out, it’s divesting its non-core assets and reining in its operating expenses. That’s why it divested most of its stake in JD.com to its investors in the form of a special dividend earlier this year, and why it plans to do the same to its stake in the food delivery giant Meituan.

Tencent shares regain some ground after regulator appears to soften gaming stance

With 1.3 billion monthly active users (MAU), its user base includes almost everyone in China. And they use it not only for communication but also to access services such as online payments, ride-sharing, public transportation, entertainment, online gaming, and more. In a way, it’s almost impossible for an average Chinese citizen to live in China without using WeChat and its ecosystem of services. Tencent (TCEHY, 0700.HK) — the parent company of social media app TikTok — shares are trading higher after announcing layoffs at video game developer Riot Games, https://www.investorynews.com/ joining the ranks of companies rolling… Tencent generated 32% of its third-quarter revenue from its fintech and business services segment, which houses Tencent Cloud (the third-largest cloud infrastructure platform in China), WeChat/Weixin Pay (one of the country’s two largest payment platforms), and its other enterprise apps. Tencent’s stock looks reasonably valued at 22 times forward earnings, but it probably won’t rally until its domestic gaming business stabilizes, its advertising business recovers, and its fintech business avoids Ant Group’s fate.

For this reason, I want diversified exposure to compelling growth opportunities in both markets. Shares of tech conglomerate Tencent (0700.HK) were down more than 12% Friday morning amid an $80 billion market selloff in Chinese gaming stocks, sparked by new, unexpected restrictions from Beijing. China’s proposed gaming rules would hit smaller developers more than large ones, while also reducing overall online advertising revenue, according to UBS.

  1. By comparison, Baidu’s (BIDU 1.15%) online marketing revenue rose 1% year over year to 19.1 billion yuan ($3 billion) last quarter.
  2. Riot said it’s cutting headcount for Legends of Runeterra and giving up on an initiative to publish games from indie developers.
  3. On the other hand, USA stocks have done very well since then while emerging markets have nearly had a lost decade of their own.
  4. To keep making money from its ecosystem, all it has to do is ensure that it remains the preferred communication platform in China.
  5. Tencent also has parallel businesses to many of the successful businesses of the western FAAMG stocks.

That stabilization should allay some near-term fears regarding the segment, which was initially expanded through a restructuring four years ago to reduce the company’s dependence on video games. However, this business could also be targeted by regulators soon. The government has reportedly been probing the use of WeChat Pay in money-laundering schemes, and it might be pressured to spin off the fintech business into a holding company where it can be tightly regulated. That progress is encouraging, but Tencent’s overseas business could also face regulatory headwinds. India’s regulators have already banned Tencent’s games along with dozens of other Chinese apps, while the Committee on Foreign Investment in the United States has been closely scrutinizing Tencent’s stakes in American gaming companies. Given enough time, revenue growth will prove more important to stock returns than multiple expansion, and companies in both the east and west appear well positioned to further grow revenue.

TikTok owner ByteDance in talks with Tencent, others to sell gaming assets

Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. With its dominant market position, Tencent has plenty of opportunities to profit from its captive users. To keep making money from its ecosystem, all it has to do is ensure that it remains the preferred communication platform in China.

On an adjusted basis, which excludes its investments and other one-time items, its net profit grew 2% to 32.3 billion yuan ($4.5 billion). Tencent’s online advertising revenue, which accounted for 15% of its top line, tumbled 13% year over year to 21.5 billion yuan ($3.37 billion). By comparison, Baidu’s (BIDU 1.15%) online marketing revenue rose 1% year over year to 19.1 billion yuan ($3 billion) last quarter.

Tencent saw a decrease in short interest during the month of February. As of February 15th, there was short interest totaling 4,257,300 shares, a decrease of 35.7% from the January 31st total of 6,621,000 shares. Based on an average daily trading volume, of 6,241,400 shares, https://www.topforexnews.org/ the short-interest ratio is presently 0.7 days. The Motley Fool has positions in and recommends JD.com and Tencent Holdings. So there could certainly be further to fall for Tencent too, which is why it’s important to dollar cost average and maintain a diversified portfolio.

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If Tencent operated in the USA, it would pretty much be a no brainer buy, especially at its current price. The company’s revenue is arguably more diversified but as fast growing as the tech giants in the USA, and its investment portfolio is one of the largest in the world. China’s gaming regulator has removed from its website rules it proposed last month aimed at curbing spending and rewards that encourage playing video games, checks by Reuters on Tuesday showed, in a m… As of writing, Tencent’s stock has a price-to-earnings ratio of 16. Besides, that existing metric doesn’t consider the value of the vast investment portfolio ($117 billion ) the company owns. Adjusting for these investments would result in an even lower price-to-earnings ratio.

Tencent’s net profit rose 60% to 94.96 billion yuan ($14.9 billion), but that was mainly driven by a massive sale of JD.com (JD 16.18%) shares last December. Excluding that gain https://www.currency-trading.org/ and other one-time benefits, Tencent’s adjusted net profit declined 25% to 24.88 billion yuan ($3.9 billion). We can draw parallels to Microsoft’s business software as well.

Industry Products

While its shareholders suffered during that period, contrarian investors can consider its aftermath an opportunity to buy shares of one of the best companies in China for cheap. The Motley Fool owns and recommends Baidu, JD.com, and Tencent Holdings. Analysts expect Tencent’s revenue to rise 13% in 2022, but for its net profit to decline 37% as it laps the JD divestment. In 2023, they expect its revenue and net income to rise 17% and 27%, respectively. Tencent also has parallel businesses to many of the successful businesses of the western FAAMG stocks. Riot said it’s cutting headcount for Legends of Runeterra and giving up on an initiative to publish games from indie developers.

The international gaming business’ growth was supported by new content for Valorant and Clash Royale, an adjustment of its deferred revenue at mobile-game developer Supercell, and its consolidation of Warframe developer Digital Extremes. Those divestments could also boost Tencent’s profits even as its revenue growth stalls out. But for now, analysts still expect Tencent’s revenue and net income to decline by 1% and 55%, respectively, for the full year. Its growth might accelerate in 2023 if its domestic gaming and advertising business stabilize, but I think those are still tall orders in this tough market. On the bright side, its advertising revenue rose 16% sequentially. During the conference call, President Martin Lau predicted its advertising business would start growing year over year again in “late 2022” as it monetizes more in-feed video ads and benefits from the gradual stabilization of the gaming, e-commerce, and fast-moving consumer goods markets.

As a result, Tencent’s total VAS (value-added service) revenue — which includes its gaming divisions, social media platforms, and streaming media subscriptions — declined by 3% in the third quarter but still accounted for more than half of its top line. This core business might gradually stabilize as Tencent expands its international gaming business, but it will likely remain under intense pressure as long as the Chinese government continues to scrutinize the gaming industry. Tencent generated 50% of its revenue from its value-added services (VAS) segment, which is split between its domestic video games, international video games, and nonadvertising social and streaming media services. The Company provides services including social network, music, gateway websites, e-commerce, mobile gaming, payment system, entertainment, artificial intelligence and technology solutions through its subsidiaries.

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