Tencent Looks Like It Has Plenty of Margin Upside -- Market Talk

Dow Jones2023-11-20

0559 GMT - Tencent's better-than-expected 3Q gross profit margin makes HSBC Global Research more confident that the tech company can meet its expectations for margin growth over 2024-2025. Analysts Charlene Liu and Ritchie Sun raise 2023-2025 earnings forecasts for Tencent by 4%-7%, liking its strong cost discipline and margin upsides. Although competition and longer R&D periods pose challenges for Tencent's game segment, its fintech and business services are a bright spot thanks partly to e-commerce fees from video accounts. The analysts see margin drivers in VA ads, search ads, the Weixin app and mini-games platform fees. They keep a buy call on H shares, viewing the valuation as undemanding. HSBC lifts the stock's target by 4.7% to HK$445. Shares are trading around HK$327. (fabiana.negrinochoa@wsj.com)

(END) Dow Jones Newswires

November 20, 2023 00:59 ET (05:59 GMT)

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