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Tencent Holdings Limited (TCEHY)
OTHER OTC:TCEHY
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Tencent Holdings
(OTC:TCEHY)
Rating:83Outperform
Price Target:
$78.00
▲(19.78%Upside)
Tencent Holdings (TCEHY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$590.01B
Dividend Yield0.59%
Average Volume (3M)1.75M
Price to Earnings (P/E)21.6
Beta (1Y)0.44
Revenue Growth9.33%
EPS Growth54.89%
CountryUS
Employees110,558
SectorCommunication Services
Sector Strength87
IndustryInternet Content & Information
Share Statistics
EPS (TTM)0.91
Shares Outstanding9,189,999,000
10 Day Avg. Volume596,688
30 Day Avg. Volume1,754,877
Financial Highlights & Ratios
PEG Ratio1.33
Price to Book (P/B)4.10
Price to Sales (P/S)0.00
P/FCF Ratio20.06
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$90.00Price Target Upside38.21% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
Tencent Holdings Business Overview & Revenue Model
Company DescriptionTencent Holdings Limited is a leading Chinese multinational conglomerate holding company, primarily focused on various internet-related services and products, entertainment, AI, and technology. Founded in 1998 and headquartered in Shenzhen, China, Tencent's diverse business segments include social networks, online games, digital content, fintech, cloud computing, and online advertising. The company is best known for its social networking platforms, such as WeChat and QQ, which have substantial user bases and serve as key components of its ecosystem.
How the Company Makes MoneyTencent generates revenue through multiple streams, with the primary ones being its value-added services, online advertising, and fintech and business services. The value-added services segment, which includes online gaming and social networks, is a significant contributor to Tencent's earnings. The company monetizes its social platforms through in-app purchases, subscription services, and gaming, with popular titles like Honor of Kings and PUBG Mobile driving substantial income. Online advertising, another crucial revenue stream, leverages Tencent's vast user base by offering targeted advertisements on its platforms. Additionally, Tencent's fintech and business services division encompasses digital payments, cloud services, and other financial services, with WeChat Pay being a prominent player in China's mobile payment landscape. Strategic investments and partnerships, both domestically and internationally, further bolster Tencent's financial position and expand its influence across various sectors.
Tencent Holdings Earnings Call Summary
Earnings Call Date:May 14, 2025
(Q1-2025)
| % Change Since: 1.12%|
Next Earnings Date:Aug 13, 2025
Earnings Call Sentiment Positive
Tencent reported strong financial performance with significant growth in revenue, gross profit, and gaming segment success. The integration of AI has shown positive impacts across multiple business areas. However, increased operating expenses and substantial CapEx spending on AI initiatives present challenges. Despite these challenges, the company's strategic investments in AI and cloud services indicate a positive long-term outlook.Q1-2025 Updates
Positive Updates
Strong Financial Performance
Total revenue for Q1 2025 was RMB180 billion, up 13% year-on-year. Gross profit was RMB100 billion, up 20% year-on-year. Non-IFRS net profit attributable to equity holders was RMB61 billion, up 22% year-on-year.
Record Gross Profit
Overall gross profit surpassed RMB100 billion for the first time in Tencent's history, representing a 20% year-on-year increase.
Gaming Segment Growth
Domestic games revenue grew by 24% year-on-year, driven by flagship games like Honor of Kings and Peacekeeper Elite. International games revenue increased by 23% year-on-year.
AI Investments and Integration
AI capabilities have been integrated into various business segments, boosting ad revenue through improved ad targeting and content recommendation. AI-related revenue in Tencent Cloud grew quickly year-on-year.
Video Accounts Success
Video Accounts marketing services revenue grew over 60% year-on-year due to increased advertiser utilization of marketing tools.
Negative Updates
Increased Operating Expenses
R&D expenses rose by 21% year-on-year to RMB18.9 billion, reflecting higher staff costs and increased investment in AI-related efforts.
CapEx Surge
Operating CapEx was RMB26.4 billion, up almost 300% year-on-year, primarily due to investments in GPUs and servers.
Challenges with GPU Supply
Constraints in GPU availability limited Tencent Cloud's AI-related revenue potential, despite increased customer demand.
Company Guidance
During Tencent's 2025 First Quarter Announcement Webinar, the company provided a detailed look into their financial and operational performance. Tencent reported a total revenue of RMB180 billion, marking a 13% year-on-year increase. The gross profit also saw a significant rise to RMB100 billion, up 20% year-on-year. The non-IFRS operating profit stood at RMB69 billion, with a year-on-year growth of 18%, while the non-IFRS net profit attributable to equity holders reached RMB61 billion, up 22%. Key performance indicators highlighted included the combined monthly active users (MAU) of Weixin and WeChat, which grew to 1.4 billion. Tencent's gaming sector also performed well, with domestic games revenue growing by 24% year-on-year, driven by flagship games like Honor of Kings. In the cloud segment, Tencent Cloud's audio and video solutions continued to lead the market in China. The company emphasized its strategic investments in AI, which are expected to create substantial long-term value, despite causing a temporary smaller gap between revenue and operating profit growth rates.Tencent Holdings Financial Statement Overview
Summary
Tencent Holdings demonstrates strong financial health with impressive profitability margins and revenue growth. The balance sheet is stable, with a good balance between debt and equity, and the company maintains robust cash flows despite a slight decline in Free Cash Flow Growth. Overall, the company is well-positioned in the Internet Content & Information industry, with strong financial metrics supporting its growth and profitability.Income Statement
Tencent Holdings shows robust revenue growth with a Revenue Growth Rate of 8.41% from 2023 to 2024. The Gross Profit Margin stands at a healthy 52.89%, and the Net Profit Margin is strong at 29.39%. EBIT Margin and EBITDA Margin are also impressive at 31.52% and 46.97%, respectively, indicating solid operational efficiency and profitability.90
Very Positive
Balance Sheet
The company's Debt-to-Equity Ratio is 0.37, reflecting a prudent use of leverage. Return on Equity (ROE) is high at 19.94%, showcasing effective management of equity to generate profits. The Equity Ratio is 54.67%, indicating a stable financial structure with more assets funded by equity than debt.85
Very Positive
Cash Flow
Tencent's Free Cash Flow Growth Rate is -6.94%, slightly declining from the previous year but still maintaining a strong Free Cash Flow. The Operating Cash Flow to Net Income Ratio is 1.33, and the Free Cash Flow to Net Income Ratio is 0.84, both indicating strong cash generation relative to its earnings.88
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 660.26B | 609.01B | 554.55B | 560.12B | 482.06B | Gross Profit |
| 349.30B | 293.11B | 238.75B | 245.94B | 221.53B | EBIT |
| 208.10B | 160.07B | 87.92B | 108.58B | 133.41B | EBITDA |
| 230.09B | 183.94B | 134.30B | 313.65B | 238.25B | Net Income Common Stockholders |
| 194.07B | 115.22B | 188.24B | 224.82B | 159.85B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 343.16B | 379.15B | 289.48B | 262.35B | 227.88B | Total Assets |
| 1.78T | 1.58T | 1.58T | 1.61T | 1.33T | Total Debt |
| 358.11B | 371.24B | 359.14B | 323.48B | 262.46B | Net Debt |
| 225.59B | 198.92B | 202.40B | 155.51B | 109.67B | Total Liabilities |
| 727.10B | 703.57B | 795.27B | 735.67B | 555.38B | Stockholders Equity |
| 973.55B | 808.59B | 721.39B | 806.30B | 703.98B |
| Cash Flow | Free Cash Flow | |||
| 162.47B | 174.56B | 95.24B | 113.02B | 127.52B | Operating Cash Flow |
| 258.52B | 221.96B | 146.09B | 175.19B | 194.12B | Investing Cash Flow |
| -122.19B | -125.16B | -104.87B | -178.55B | -181.96B | Financing Cash Flow |
| -176.49B | -82.57B | -59.95B | 21.62B | 13.65B |
Tencent Holdings Technical Analysis
Positive
65.12
Price Trends
62.62
Positive
59.80
Positive
55.81
Positive
Market Momentum
1.05
Positive
55.31
Neutral
15.93
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TCEHY, the sentiment is Positive. The current price of 65.12 is above the 20-day moving average (MA) of 64.55, above the 50-day MA of 62.62, and above the 200-day MA of 55.81, indicating a bullish trend. The MACD of 1.05 indicates Positive momentum. The RSI at 55.31 is Neutral, neither overbought nor oversold. The STOCH value of 15.93 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TCEHY.
Tencent Holdings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
85 Outperform | $2.10T | 19.28 | 34.79% | 0.46% | 13.02% | 37.73% | |
84 Outperform | $2.10T | 19.40 | 34.79% | 0.46% | 13.02% | 37.73% | |
83 Outperform | $590.01B | 21.64 | 21.25% | 0.59% | 9.33% | 54.89% | |
80 Outperform | $1.61T | 25.05 | 39.83% | 0.31% | 19.37% | 47.56% | |
78 Outperform | $26.48B | 20.91 | 14.37% | 0.98% | 4.59% | 83.27% | |
68 Neutral | $29.29B | 8.25 | 9.85% | ― | -1.33% | 32.92% | |
61 Neutral | $14.30B | 5.71 | -4.20% | 3.66% | 2.74% | -35.53% |
* Communication Services Sector Average
Performance Comparison
TCEHY
Tencent Holdings
65.12
18.41
39.41%
BIDU
Baidu
84.39
-14.52
-14.68%
META
Meta Platforms
645.05
179.70
38.62%
GOOGL
Alphabet Class A
171.86
0.57
0.33%
TME
Tencent Music Entertainment Group
17.49
2.63
17.70%
GOOG
Alphabet Class C
172.96
0.22
0.13%
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.