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

$558.31B

Dividend Yield0.62%

Average Volume (3M)444.35K

Price to Earnings (P/E)21.2

Beta (1Y)0.47

Revenue Growth6.71%

EPS Growth69.43%

CountryUS

Employees110,558

SectorCommunication Services

Sector Strength85

IndustryInternet Content & Information

Share Statistics

EPS (TTM)2.91

Shares Outstanding9,203,373,000

10 Day Avg. Volume0

30 Day Avg. Volume444,351

Financial Highlights & Ratios

PEG Ratio0.30

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

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 Upside43.04% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

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 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

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

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

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.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
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

Technical Analysis Sentiment

Positive

Last Price61.52

Price Trends

50DMA

63.17

Negative

100DMA

58.00

Positive

200DMA

54.47

Positive

Market Momentum

MACD

-0.30

Negative

RSI

52.08

Neutral

STOCH

91.16

Negative

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 61.52 is above the 20-day moving average (MA) of 59.68, below the 50-day MA of 63.17, and above the 200-day MA of 54.47, indicating a neutral trend. The MACD of -0.30 indicates Negative momentum. The RSI at 52.08 is Neutral, neither overbought nor oversold. The STOCH value of 91.16 is Negative, 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 (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
GOOG	84 Outperform	$1.93T	19.82	34.79%	0.50%	13.02%	37.73%
GOOGL	83 Outperform	$1.97T	17.99	34.79%	0.50%	13.02%	37.73%
TCEHY	82 Outperform	$558.31B	21.15	21.80%	0.62%	6.71%	69.43%
META	80 Outperform	$1.44T	23.99	37.14%	0.37%	21.94%	61.97%
TME	77 Outperform	$20.38B	22.34	10.75%	0.99%	0.63%	34.09%
BIDU	73 Outperform	$31.26B	9.59	9.14%	―	-2.60%	16.71%
Sector *	59 Neutral	$13.50B	7.28	-2.06%	3.86%	2.39%	-36.82%

* Communication Services Sector Average

Performance Comparison

TCEHY

Tencent Holdings

61.52

15.22

32.87%

BIDU

Baidu

87.91

-25.50

-22.48%

Tencent Holdings Earnings Call Summary

Earnings Call Date:Mar 19, 2025

(Q4-2024)

% Change Since: -11.65%|

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.

Q4-2024 Updates

Positive Updates

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.

Negative Updates

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.