What’s Going on with Tencent Stock?

Tencent Holdings Ltd announced its second-quarter results beating estimates due to improvement in the gaming division.?

The Chinese tech giant posted revenue of 161.12 billion Chinese Yuan (around $22.5 billion). This represents an impressive 8% YoY increase in revenue, while profits improved by 82% during the same time.

Its shares now face a slight correction of 1% in the last five days and 1.44% the day after the announcement.

Gaming Drives Tencent’s Revenue

The share price has been up 28% since the start of the year, and it has been boosted by sales of a new game called Dungeon & Fighter Mobile (DnF Mobile).

The game?generated $270 million in China, outperforming every other game produced by Tencent in its first month of revenue. According to AppMagic, the game has been downloaded on iOS more than 5 million times in China solely. The game also reached $63 million in player spending in the first week of its launch.

According to the latest results, game revenue increased 9% year over year, bringing the company a total of 34.6 billion yuan. An equal rise in international games revenue complemented this.

Tencent’s Advertising Is Growing

Online advertising revenue grew by 19%, touching 29.9 billion yuan ($4.18 billion). The main driver has been Channels, a short-video provision inside?WeChat. Channels has seen impressive growth since its beginning, with more?than 813 million?monthly active users, more than its competitors Douyin (680 million users) and Kuaishou (390 million users).

The company is improving its services by constantly providing monetization opportunities for Channels such as live-streaming e-commerce and paid subscriptions.

Tencent’s fintech revenue increased 4% to 50.4 billion yuan ($7.05 billion) as slow growth in consumer spending and a fall in loan services put downward pressure on this front.

Tencent’s Disappointing Metrics Lead to Share Drop

However, Tencent Music Entertainment Group (TME) disappointed investors and analysts as the company’s revenue for the second quarter fell by 1.7% on a YoY basis.

Revenue was 7.16 billion yuan, or $985 million. Earnings per share barely?met expectations of 1.07 yuan, or $0.15. Net income was 1.68 million yuan,?versus 1.29 million yuan last year.

The company’s social entertainment services revenue plummeted 45.8%, while the mobile MAU (monthly average users) sunk 31.6%.

Tencent Holdings Prediction

According to Barron’s, the stock price target is around $70 (high), with a low of $38.97. All the analysts put the share as a Buy. This is almost identical to what estimates by MarketWatch have to offer as well, suggesting the strong standing of the share.

TradingView surveyed 52 analysts offering their price targets for the next year. They hold 546 HKD, which is the maximum estimate, while the analysts see the share price bottoming out at 306.2 HKD.

Future Outlook

Tencent is hopeful regarding the future of its business. The company has already upgraded and rebranded Tencent channels, allowing moderators to use customizable tools to manage their channels with additional live streaming and texting features.

Mini Programs’ total user time spent registered a 20% increase on a YoY basis, building on a strong e-commerce and content ecosystem. They have also improved their flagship games, such as Honor of Kings and Peacekeeper Elite, which can increase revenue.

Naruto?Mobile has already reached 10 million monthly DAU. As part of its?long-term plan, the company also intends to start providing services to its industries, such as?connected cars and healthcare.