Tencent’s stock price just keeps on tumbling

By BLOOMBERG

HONG KONG • Tencent Holdings Ltd’s stock price keeps tumbling further away from analysts’ price targets.

Concern about earnings and a global sell-off in tech stocks have dragged Tencent’s shares down 7.5% this week alone. The Chinese Internet giant closed at HK$345 (RM179.40) in Hong Kong yesterday, the lowest in 10 months.

The average price target of 51 analysts is HK$511.62. That’s almost 50% above current levels, even after several cut their forecasts last month.

Tencent soared every year bar two since its Hong Kong debut 14 years ago. The stock climbed 114% in 2017 and then reached a record high this January.

The sheen has rapidly fallen off since then, with the Shenzhen-based company losing almost US$160 billion (RM652.8 billion) of market value.

In addition to concern over the tech sector in general, Tencent has been vulnerable to market sell-offs in Hong Kong as investors reduced exposure in the most widely-held, liquid names.

Concerns have also mounted about its shrinking margins.

JPMorgan Chase & Co, which this week trimmed its price target by 4% to HK$480, said Tencent may see weakness in gaming revenue in the near term. The outlook next year may improve post second-quarter (2Q) results as Tencent is likely to see full-year monetisation of its PlayerUnknown’s Battlegrounds and Fortnite games, JPMorgan said in a note.

Tencent reports earnings on Aug 15, and analysts are expecting 2Q income to grow at the weakest pace since 2012. At least 11 cut their price targets in July, including Credit Suisse Group AG and Morgan Stanley.

Still, all 51 forecasters tracked by Bloomberg have maintained the equivalent of a ‘Buy’ recommendation on Tencent shares.