Chinese tech giant Tencent Holdings (TCEHY) (HK:0700) repurchased roughly $193 million (HK$1.5 billion) worth of shares yesterday to support its falling share price. This is the WeChat maker’s largest share buyback in 20 years. According to a regulatory filing, Tencent repurchased 3.93 million of the company shares from the Hong Kong stock exchange. The buyback was undertaken at prices ranging between HK$376.8 to HK$392.4 per share.
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On January 6, the U.S. Department of Defense (DoD) added Tencent to its list of Chinese Military Companies (CMC). These companies are blacklisted from doing any business in the U.S. since the list implies that they have direct or indirect ties with the Chinese military. The unfavorable news sent Tencent shares spiraling down in both the Hong Kong and U.S. bourses. Another shocking addition to the list was that of Chinese EV (electric vehicle) battery manufacturer CATL.
Although Tencent has denied any relations or wrongdoing in this regard, shares have taken a toll. Tencent is determined to clear its name off the list and have active discussions with the DoD. Meanwhile, some investors who believe in Tencent’s innocence also bought shares yesterday at discounted prices. Data shows that mainland Chinese investors scooped up roughly HK$14 billion worth of Tencent shares.
Analysts React to Tencent’s Huge Share Buyback
Following the share buyback news, Deutsche Bank analyst Leo Chiang stated that he was encouraged by Tencent’s move. At the same time, he acknowledged that shares could remain volatile in the near term.
Similarly, Goldman Sachs analysts noted that share buyback is a good way to “help offset capital outflow impact.” The analysts are wary of the multiple challenges impacting Chinese companies. These include the growing Pentagon list, uncertainty related to tariffs and sanctions, and the political backdrop in China.
Is Tencent a Good Stock to Buy Now?
On TipRanks, TCEHY stock has a Moderate Buy consensus rating based on one Buy rating received in the past three months. The average Tencent Holdings price target of $66 implies 37.2% upside potential from current levels. In the past year, TCEHY shares have gained 31.4%.
