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.
- 3 Wall Street equities research analysts have issued “buy,” “hold,” and “sell” ratings for Tencent in the last year.
- But it’s sputtered out as the government has imposed tighter playtime restrictions for minors and temporarily suspended the approval of new games last year.
- Tencent (TCEHY 2.70%) posted its third-quarter earnings report on Nov. 16.
- 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.
- Investors of record on Friday, May 19th will be given a dividend of $0.2691 per share on Tuesday, June 20th.
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, 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.
The Chinese tech giant’s growth has slowed to a crawl.
Tencent Holdings Limited, an investment holding company, offers value-added services (VAS), online advertising, fintech, and business services in the People’s Republic of China and internationally. It operates through VAS, Online Advertising, FinTech and Business Services, and Others segments. In addition, the company operates innovation business, which includes artificial intelligences; and discover and develops enterprise and next-generation technologies for food production, energy, and water management application. Tencent Holdings Limited was formerly known as Tencent (BVI) Limited and changed its name to Tencent Holding Limited in February 2004. The company was founded in 1998 and is headquartered in Shenzhen, the People’s Republic of China.
The Shenzhen-based social media and entertainment conglomerate also controls another 16% stake in Nio’s ADSs through three of its units. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. Those moves indicate the Chinese government doesn’t want private digital-payment platforms to overpower state-backed banks. Therefore, investors who expect Tencent to offset the slower growth of its gaming business with the expansion of its fintech business could be sorely disappointed.
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.day-trading.info/ 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.
Its fintech and cloud businesses are still growing…for now
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.
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.
Tencent generated 15% of its revenue from its advertising business, which sells ads on its core social networking app WeChat (known as Weixin in China), its ad-supported streaming services, and other smaller apps. Aside from deriving less revenue from advertising, an important difference between Tencent’s platforms and western social media like Facebook is that Tencent basically created an operating system within its social network apps. The only bright spot in Tencent’s report was its fintech and business services segment, which houses WeChat Pay, Tencent https://www.forex-world.net/ Cloud, and its other cloud-based services. Its revenue rose 25% year over year to 48 billion yuan ($7.5 billion), or 33% of its top line, as the use of its digital payment and cloud-based business services soared across multiple industries. Tencent’s social-networks business generated stable growth through in-app purchases on its livestreaming platforms as well as premium subscription sales on Tencent Video and Tencent Music Entertainment Group. However, all of those platforms could still struggle to expand in the saturated streaming-media market.
Tencent chief says gaming business under threat, catching up in AI
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 https://www.investorynews.com/ 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.
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.
2010: Founding and growth
On the other hand, USA stocks have done very well since then while emerging markets have nearly had a lost decade of their own. Tencent Holdings’ Riot Games plans to lay off 530 employees, or about 11% of staff globally, the online gaming company said on Monday in a blog that included a letter to staff from CEO Dylan Jadeja. Riot Games, the developer of the popular “League of Legends” multiplayer battle game, is joining other tech companies that have been trimming their payrolls with a layoff of 11% of its staff. According to one analyst, the rating for TCEHY stock is “Buy” and the 12-month stock price forecast is $46.0. Tencent’s largest shareholder is Prosus (majority owned by Naspers), which owns 30.86% of all shares[2] and hence is the controlling shareholder.[286] However, Ma Huateng, co-founder of Tencent, still owns a significant stake (8.42%). Patient investors with investing horizons of more than five years should consider buying some shares.
Tencent And NetEase Stocks Continue To Rebound As China Reportedly Ousts Official Who Proposed New Gaming Restrictions
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.
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.
