Tencent Holdings: Strong Growth Prospects Justify Buy Rating Amidst Diversified Revenue and Resilient Business Model

Analyst Thomas Chong of Jefferies reiterated a Buy rating on Tencent Holdings Limited (TCTZF – Research Report), retaining the price target of HK$453.00.

Thomas Chong has given his Buy rating due to a combination of factors reflecting Tencent Holdings Limited’s strong growth prospects and diverse revenue streams. The imminent release of the highly anticipated game DnF Mobile, set for May 21st, is expected to significantly contribute to gaming revenue turnaround in the second quarter of 2024. Chong anticipates the company’s gaming segment to recover from a softer first quarter, which had already been factored into the current share price. Moreover, Tencent’s portfolio includes a number of emerging gaming franchises that are likely to drive future growth, building on the increased number of major gaming hits in China from the previous year.

Furthermore, Tencent is seen as a top pick within Jefferies’ coverage universe due to its quality growth model, which is resilient in the face of macroeconomic uncertainties. The company benefits from diversified business models, including advertising and financial business services (FBS), which are expected to continue expanding their market share and margins. Chong emphasizes the strength of Tencent’s advertising technology upgrades and the robust performance of video accounts. Additionally, favorable secular trends in payment services and the broader financial and business services sector underscore Tencent’s potential for long-term growth, justifying the Buy rating.

According to TipRanks, Chong is an analyst with an average return of -7.3% and a 30.40% success rate. Chong covers the Communication Services sector, focusing on stocks such as Tencent Holdings Limited, NetEase, and China Literature.

In another report released on April 15, CMB International Securities also maintained a Buy rating on the stock with a HK$445.00 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.