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Tencent Hldgs (TCEHY)
:TCEHY

Tencent Holdings (TCEHY) AI Stock Analysis

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Tencent Holdings

(OTC:TCEHY)

Rating:79Outperform
Price Target:
$72.00
▲(13.82%Upside)
Tencent Holdings receives a strong overall score due to robust financial performance, reflected in high profitability margins and revenue growth. The earnings call indicates a positive long-term outlook with strategic investments in AI and cloud services. However, technical analysis suggests potential short-term weakness, and increased operating expenses may pressure margins. The stock's valuation is reasonable, supporting its growth potential.

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

Tencent Holdings Business Overview & Revenue Model

Company DescriptionTencent Holdings Limited, an investment holding company, provides value-added services (VAS) and Online advertising services in Mainland China and internationally. The company operates through VAS, Online Advertising, FinTech and Business Services, and Others segments. It offers online games and social network services; FinTech and cloud services, and online advertising services. The company is also involved in the production, investment, and distribution of films and television programs for third parties, as well as copyrights licensing, merchandise sales, and other activities. n addition, it develops software; develops and operates online games; and provides information technology, information system integration, asset management, online literature, and online music entertainment services. Tencent Holdings Limited company was founded in 1998 and is headquartered in Shenzhen, the People's Republic of China.
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: -1.77%|
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
90
Very Positive
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.
Balance Sheet
85
Very Positive
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.
Cash Flow
88
Very Positive
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.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue660.26B609.01B554.55B560.12B482.06B
Gross Profit349.30B293.11B238.75B245.94B221.53B
EBITDA230.09B183.94B134.30B313.65B238.25B
Net Income194.07B115.22B188.24B224.82B159.85B
Balance Sheet
Total Assets1.78T1.58T1.58T1.61T1.33T
Cash, Cash Equivalents and Short-Term Investments343.16B379.15B289.48B262.35B227.88B
Total Debt358.11B371.24B359.14B323.48B262.46B
Total Liabilities727.10B703.57B795.27B735.67B555.38B
Stockholders Equity973.55B808.59B721.39B806.30B703.98B
Cash Flow
Free Cash Flow162.47B174.56B95.24B113.02B127.52B
Operating Cash Flow258.52B221.96B146.09B175.19B194.12B
Investing Cash Flow-122.19B-125.16B-104.87B-178.55B-181.96B
Financing Cash Flow-176.49B-82.57B-59.95B21.62B13.65B

Tencent Holdings Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price63.26
Price Trends
50DMA
64.52
Negative
100DMA
63.65
Negative
200DMA
58.24
Positive
Market Momentum
MACD
-0.30
Positive
RSI
40.31
Neutral
STOCH
-0.05
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 63.26 is below the 20-day moving average (MA) of 64.42, below the 50-day MA of 64.52, and above the 200-day MA of 58.24, indicating a neutral trend. The MACD of -0.30 indicates Positive momentum. The RSI at 40.31 is Neutral, neither overbought nor oversold. The STOCH value of -0.05 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 (62)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
83
Outperform
$2.15T19.8134.79%0.47%13.02%37.73%
82
Outperform
$1.84T28.3739.83%0.29%19.37%47.56%
81
Outperform
$2.15T19.9334.79%0.47%13.02%37.73%
79
Outperform
$574.63B21.0221.25%0.92%9.33%54.89%
74
Outperform
$31.43B8.779.85%-1.33%32.92%
TMTME
72
Outperform
$30.54B23.3514.37%0.88%4.59%83.27%
62
Neutral
$40.68B-1.16-12.05%3.89%2.04%-69.68%
* Communication Services Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TCEHY
Tencent Holdings
63.26
13.67
27.57%
BIDU
Baidu
86.93
-6.22
-6.68%
META
Meta Platforms
717.51
223.04
45.11%
GOOGL
Alphabet Class A
180.19
-5.44
-2.93%
GOOG
Alphabet Class C
181.31
-5.98
-3.19%
TME
Tencent Music Entertainment Group
19.79
5.11
34.81%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jul 10, 2025