Tencent Holdings (TCEHY) AI Stock Analysis

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Tencent Holdings

(OTC:TCEHY)

82Outperform

Tencent Holdings enjoys a solid financial position with strong revenue and profit growth, supported by strategic investments in AI and expansions in games and music. Despite some challenges like high CapEx affecting free cash flow and supply constraints in AI services, the company's overall outlook remains positive. The valuation is reasonable, and technical indicators show moderate upward momentum, further supporting the stock's attractiveness.

Tencent Holdings (TCEHY) vs. S&P 500 (SPY)

Market Cap

$518.80B

Dividend Yield0.67%

Average Volume (3M)444.35K

Price to Earnings (P/E)19.6

Beta (1Y)0.46

Revenue Growth6.71%

EPS Growth69.43%

CountryUS

Employees110,558

SectorCommunication Services

Sector Strength79

IndustryInternet Content & Information

Share Statistics

EPS (TTM)2.91

Shares Outstanding9,203,373,000

10 Day Avg. Volume1,333,054

30 Day Avg. Volume444,351

Financial Highlights & Ratios

PEG Ratio0.28

Price to Book (P/B)N/A

Price to Sales (P/S)7.05

Price to Cash Flow (P/CF)N/A

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$88.00

Price Target Upside53.95% 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 Financial Statement Overview

Summary

Tencent Holdings exhibits strong financial health with consistent revenue growth, high profitability margins, effective leverage management, and robust cash flow generation. The company is well-positioned to sustain growth while managing risks associated with leverage.

Income Statement

Very Positive

Tencent Holdings has demonstrated strong revenue growth, with a notable increase from 609.0 billion CNY in 2023 to 643.0 billion CNY in TTM 2024, representing a growth rate of approximately 5.6%. The gross profit margin is robust at 52.3% in the TTM period, alongside a healthy net profit margin of 26.4%. Additionally, the EBIT margin stands at 31.5%, and the EBITDA margin at 35.7%, indicating efficient cost management and profitability.

Balance Sheet

Very Positive

The balance sheet reflects a solid financial position with a debt-to-equity ratio of 0.38, showcasing manageable leverage. The return on equity (ROE) is impressive at 18.6%, suggesting effective utilization of equity to generate profits. The equity ratio is strong at 52.9%, indicating a stable balance between debt and equity.

Cash Flow

Very Positive

Tencent's cash flow position is robust, with a significant free cash flow growth rate of 22.4% from 2023 to the TTM period. The operating cash flow to net income ratio is 1.52, reflecting efficient conversion of income into cash. The free cash flow to net income ratio stands at 1.26, indicating strong cash generation relative to net income.

TTM	Dec 2023	Dec 2022	Dec 2021	Dec 2020	Dec 2019
Breakdown
Income Statement		Total Revenue
643.01B	609.01B	554.55B	560.12B	482.06B	377.29B
	Gross Profit
336.16B	293.11B	238.75B	245.94B	221.53B	167.53B
	EBIT
202.38B	160.07B	87.92B	108.58B	133.41B	118.69B
	EBITDA
229.33B	183.94B	134.30B	313.65B	238.25B	161.76B
	Net Income Common Stockholders
169.77B	115.22B	188.24B	224.82B	159.85B	93.31B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
26.33B	379.15B	289.48B	262.35B	227.88B	187.02B
	Total Assets
56.80B	1.58T	1.58T	1.61T	1.33T	953.99B
	Total Debt
0.00	371.24B	359.14B	323.48B	262.46B	232.52B
	Net Debt
-12.61B	198.92B	202.40B	155.51B	109.67B	99.53B
	Total Liabilities
27.72B	703.57B	795.27B	735.67B	555.38B	465.16B
	Stockholders Equity
28.46B	808.59B	721.39B	806.30B	703.98B	432.71B
Cash Flow		Free Cash Flow
213.61B	174.56B	95.24B	113.02B	127.52B	91.60B
	Operating Cash Flow
258.43B	221.96B	146.09B	175.19B	194.12B	148.59B
	Investing Cash Flow
-87.25B	-125.16B	-104.87B	-178.55B	-181.96B	-116.17B
	Financing Cash Flow
-171.10B	-82.57B	-59.95B	21.62B	13.65B	1.67B

Tencent Holdings Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price57.16

Price Trends

50DMA

62.23

Negative

100DMA

56.90

Positive

200DMA

53.73

Positive

Market Momentum

MACD

-1.66

Positive

RSI

34.01

Neutral

STOCH

12.05

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TCEHY, the sentiment is Neutral. The current price of 57.16 is below the 20-day moving average (MA) of 63.57, below the 50-day MA of 62.23, and above the 200-day MA of 53.73, indicating a neutral trend. The MACD of -1.66 indicates Positive momentum. The RSI at 34.01 is Neutral, neither overbought nor oversold. The STOCH value of 12.05 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TCEHY.

Tencent Holdings Peers Comparison

Overall Rating

UnderperformOutperform

Sector (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
META	84 Outperform	$1.38T	22.79	37.14%	0.37%	21.94%	61.97%
GOOG	83 Outperform	$1.93T	19.82	32.91%	0.50%	13.89%	38.99%
TCEHY	82 Outperform	$518.80B	19.65	21.80%	0.67%	6.71%	69.43%
GOOGL	82 Outperform	$1.93T	19.54	32.91%	0.51%	13.89%	38.99%
TME	80 Outperform	$21.51B	20.43	10.75%	1.09%	0.63%	34.09%
BIDU	76 Outperform	$28.60B	9.02	9.14%	―	-2.60%	16.71%
Sector *	58 Neutral	$26.25B	2.79	-10.85%	4.33%	2.15%	-44.22%

* Communication Services Sector Average

Performance Comparison

TCEHY

Tencent Holdings

57.16

18.57

48.12%

BIDU

Baidu

82.73

-13.48

-14.01%

Tencent Holdings Earnings Call Summary

Earnings Call Date: Mar 19, 2025 | % Change Since: -17.91% | Next Earnings Date: May 14, 2025

Earnings Call Sentiment Positive

Tencent demonstrated strong financial performance with significant growth in revenue, profit, and AI initiatives. Notable achievements were seen in games, music, and marketing services. However, increased CapEx impacted free cash flow, and there were challenges in fully capturing AI service demand due to supply constraints. Despite these challenges, the overall sentiment remains positive due to the company's robust growth and strategic advancements.

Highlights

Strong Financial Performance in Q4 2024

Total revenue was RMB172 billion, up 11% year-on-year. Gross profit was RMB91 billion, up 17% year-on-year. Non-IFRS operating profit was RMB59 billion, up 21% year-on-year, and non-IFRS net profit attributable to equity holders was RMB55 billion, up 30% year-on-year.

Successful AI Initiatives and Growth

Tencent advanced HunYuan capabilities, integrated AI across businesses, and achieved significant growth in Yuanbao, which became the third highest AI native mobile application in China by DAU.

Record-Breaking Achievements in Games and Music

Domestic Games revenue grew 23% year-on-year. International Games revenue increased 15%. Tencent Music subscribers grew to 121 million with an 18% increase in music subscription revenue.

Marketing Services Revenue Growth

Marketing Services revenue grew 17% to RMB35 billion in Q4 2024, driven by AI enhancements, with Video Accounts marketing services revenue growing over 60% year-on-year.

Significant Shareholder Returns

Tencent paid HKD32 billion in cash dividends and repurchased HKD112 billion worth of shares during the year.

Lowlights

Increased CapEx and Reduced Free Cash Flow

Operating CapEx was RMB34.9 billion, up 421% year-on-year, driven by investment in AI capabilities, leading to a significant reduction in free cash flow, which was down 87% year-on-year.

Supply Constraints in AI Services

Demand for AI services was strong, but supply constraints limited the ability to capture this demand fully due to delayed GPU deployment.

Flat Growth in Commercial Payments

Commercial payment revenue remained largely stable year-on-year, with ongoing pricing pressure despite increased transaction volumes.

Company Guidance

During Tencent Holdings Limited's 2024 Fourth Quarter and Annual Results Announcement Webinar, several key financial metrics and strategic insights were highlighted. The company reported a total revenue of RMB172 billion for the fourth quarter, marking an 11% year-on-year increase. Gross profit reached RMB91 billion, up 17% year-on-year, while non-IFRS operating profit increased by 21% year-on-year to RMB59 billion. Non-IFRS net profit attributable to equity holders rose by 30% year-on-year, totaling RMB55 billion. For the full year, Tencent's marketing services revenue grew by 20%, and they paid out HKD32 billion in cash dividends while repurchasing HKD112 billion worth of shares. Additionally, Tencent's AI initiatives were highlighted, with investments leading to a threefold increase in annual CapEx to $10.7 billion, equivalent to approximately 12% of their revenue. The company plans to continue investing in AI, aiming for further growth and innovation while balancing shareholder returns.

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.