Tencent Holdings Ltd’s newly launched “Dungeon & Fighter” (DnF Mobile) has got off to a strong start, dominating top-grossing charts on Apple’s iOS platform in China for nearly a month, industry data … Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Besides, in the name of common prosperity, the government has indirectly extracted 100 billion yuan (about $15.5 billion) from Tencent.

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Since then, TCEHY stock has increased by 24.9% and is now trading at $47.20. Which stocks are likely to thrive in today’s challenging market? Click the link below and we’ll send you MarketBeat’s list of ten stocks that will drive in any economic environment. Analysts expect Tencent’s revenue to rise 13% in 2022, but for its net profit to decline 37% as it laps the JD divestment. In 2023, they expect its revenue and net income to rise 17% and 27%, respectively. Tencent’s net profit rose 60% to 94.96 billion yuan ($14.9 billion), but that was mainly driven by a massive sale of JD.com (JD -1.18%) shares last December.

South Korean gaming company Shift Up is set to price its initial public offering (IPO) at the top end of its price band and raise $313 million, according to a source with direct knowledge of the matte… Tencent’s revenue has seen a significant boost, thanks to the strong performance of their game Dungeon Fighter Mobile. According to one analyst, the rating for TCEHY stock is “Buy” and forex trading strategies for beginners the 12-month stock price forecast is $46.0. Sign up for MarketBeat All Access to gain access to MarketBeat’s full suite of research tools.

Chinese Stocks Fall on Disappointing Economic Growth

The company was founded in 1998 and is headquartered in Shenzhen, the People’s Republic of China. With 1.3 billion monthly active users (MAU), its user base includes almost everyone in China. And they use it not only for communication but also to access services such as online payments, ride-sharing, public transportation, entertainment, online gaming, and more. In a way, it’s almost impossible for an average Chinese citizen to live in China without using WeChat and its ecosystem of services.

Tencent removes hit game ‘Dungeon & Fighter’ from Huawei, Oppo, and Vivo app stores

Tencent’s 2022 results might have disappointed its longtime shareholders, but make no mistake. One was that the company had become gigantic, generating 555 billion yuan  ($79.6 billion) in revenue in 2022. It is quite natural for a company of that size to find it challenging to sustain high growth rates. While its shareholders suffered during that period, contrarian investors can consider its aftermath an opportunity to buy shares of one of the best companies in China for cheap. Like most Chinese stocks, Tencent Holdings (TCEHY -1.30%) has been on a rough ride in recent years.

China’s Tencent Holdings reported a 8% rise in second-quarter revenue on Wednesday, driven by a recovery in its gaming business after a launch of a new mobile game in May that got off to a strong star… Tencent blamed that slowdown on China’s regulatory crackdown on online education, gaming, and internet service companies, all of which had advertised heavily on WeChat and Tencent’s streaming media services. Chinese internet giant Tencent announced on Wednesday an 82 percent surge in second-quarter net profit, its biggest jump since late 2020, after a resurgence in its gaming business. Chinese tech giant Alibaba said on Wednesady that its core Taobao and Tmall e-commerce platforms will now allow payment through Tencent’s WeChat app for the first time. However, this business could also be targeted by regulators soon. The government has reportedly been probing the use of WeChat Pay in money-laundering schemes, and it might be pressured to spin off the fintech business into a holding company where it can be tightly regulated.

Tencent’s stock looks reasonably valued at 22 times forward earnings, but it probably won’t rally until its domestic gaming business stabilizes, its advertising business recovers, and its fintech business avoids Ant Group’s fate. For now, investors should avoid Tencent and stick with more-promising growth stocks in this challenging market. Those moves indicate the Chinese government understanding bond prices and yields doesn’t want private digital-payment platforms to overpower state-backed banks.

Besides, that existing metric doesn’t consider the value of the vast investment portfolio ($117 billion ) the company owns. Adjusting for these investments would result in an even lower price-to-earnings ratio. With its dominant market position, Tencent has plenty of opportunities to profit from its captive users. To keep making money from its ecosystem, all it has to do is ensure that it remains the preferred communication platform in China.

1. Tencent blamed that slowdown on China’s regulatory crackdown on online education, gaming, and internet service companies, all of which had advertised heavily on WeChat and Tencent’s streaming media services.
2. In a way, it’s almost impossible for an average Chinese citizen to live in China without using WeChat and its ecosystem of services.
3. Tencent’s domestic gaming business was once its main growth engine.
4. The Motley Fool owns and recommends Baidu, JD.com, and Tencent Holdings.
5. However, this business could also be targeted by regulators soon.

That’s all speculation for now, but Ant Group (which owns WeChat Pay’s closest competitor, Alipay) was also probed by regulators and forced to restructure its business as a financial holding company last year. Tencent’s online advertising revenue, which accounted for 15% of its top line, tumbled 13% year over year to 21.5 billion yuan ($3.37 billion). By comparison, Baidu’s (BIDU -2.17%) online marketing revenue rose 1% year over year to 19.1 billion yuan ($3 billion) last quarter. Moreover, buying the stock at its current valuation poses no significant risk of permanent capital loss. As of writing, Tencent’s stock has a price-to-earnings ratio of 16.

Usually, shares of a company of Tencent’s caliber won’t come cheap. But this stock — still down by more than half from its 2021 peak — is currently trading at a reasonable valuation. In other words, Tencent has twin engines of internal business and external investments to keep its growth machine humming. If that’s not enough, Tencent has proven to be an excellent tech investor, having bought stakes early on in what have become some of the region’s most prominent companies.

Therefore, investors who expect Tencent to offset the slower growth of its gaming business with the expansion of its fintech business could be sorely disappointed. Tencent generated 50% of its revenue from its value-added services (VAS) segment, which is split between its domestic video games, international video games, and nonadvertising social and streaming media services. Its VAS revenue rose 7% year over year to 71.9 billion yuan ($11.3 billion) during the quarter, compared to its 8% growth in the third quarter and 28% growth in the year-ago quarter. That slowdown was mainly caused by the sluggish growth of its domestic gaming and social network businesses, which largely offset the stronger growth of its international gaming business.

But the bigger culprits were external factors such as China’s economic weakness, which was caused in part by that nation’s extended and strict COVID lockdowns. Other Chinese government policies also hurt Tencent’s financials in 2022. why white label crypto exchange software is the smart choice for startups For example, its regulatory crackdowns on the online education and tech industries have severely impacted Tencent’s advertising and cloud income.