Tencent’s market value soars after forecast-beating first quarter data

Source:Reuters Published: 2018/5/17 21:50:50

Robust earnings from Tencent Holdings sent its market capitalization surging by as much as $34 billion on Thursday, helping the Chinese technology giant briefly reclaim its position as Asia's most valuable listed company.

On Wednesday, Tencent reported better-than-expected first-quarter net profit and gross profit margin figures, driven by the strong performance of its mobile gaming business and gains in its investment operations.

The results helped offset worries about pressure on Tencent's margins as it spends heavily in areas such as gaming, entertainment, retail and e-commerce for growth amid stiff competition from Alibaba Group Holding and others. Those concerns have weighed on Tencent's shares this year.

The shares closed 4.59 percent higher at HK$414.8 ($52.84). At the day's high, its market capitalization was about $514 billion, surpassing Alibaba's $507 billion.

Despite the share jump on Thursday, Tencent's market capitalization, at current exchange rates, is some $70 billion lower than its January peak.

Tencent's first-quarter profit soared 61 percent and revenue climbed 48 percent. Its gross margin was 50.4 percent, the first sequential rise since mid-2015.

A major contributor to the bottom line was investments, which brought in 7.6 billion yuan ($1.19 billion) in gains. The company made 120 deals in 2017 alone, according to Bernstein's research, including in US luxury electric car producer Tesla Inc and Snapchat owner Snap Inc.

In a note, Daiwa Securities called it "a stellar set of results" and raised its target price on the stock to HK$530 from HK$490. Goldman Sachs raised its target price to HK$546 from HK$535.

Jefferies, however, cut its target price to HK$515 from HK$530, saying that while Tencent's gross profit margin was higher than expected, the push to grow revenues from its advertising and financial services business might continue to weigh on the firm's margins. Credit Suisse lowered its target price for the stock to HK$523 from HK$540.

Tencent said on Wednesday that delays in earning revenues from games in China and heavy marketing expenses would hit mobile games revenue in the short term.

Posted in: COMPANIES

blog comments powered by Disqus