Should I Buy Tencent Stock
Those growth rates seem anemic, but Tencent's stock had already been cut in half over the past two years amid concerns about China's tightening regulations, slowing economic growth, and COVID-19 lockdowns. So is it the right time to take the contrarian view and buy Tencent as a turnaround play? Let's review its core businesses and valuations to decide.
should i buy tencent stock
Tencent is barely growing, yet its stock still trades at 20 times next year's earnings. Therefore, I can't consider it a value play -- or an attractive investment at all -- when so many other high-growth stocks are still on sale.
Simply put, we still can't consider Tencent to be a bargain at 25 times forward earnings. Alibaba, which arguably has a clearer path toward a long-term recovery than Tencent, trades at just 10 times forward earnings. So for now, investors should avoid Tencent (and most other Chinese tech stocks) and stick with more promising plays to navigate this challenging market.
Last month, Chinese stocks got a fresh lease of life, witnessing their biggest rally in the last two decades. A volley of positive news buoyed most Chinese stocks. Talks between U.S. President Joe Biden and Chinese President Xi Jinping have given signs of easing tension between the two nations. With that, the ever-growing concern of the delisting of Chinese stocks from the U.S. stock markets is also put to rest.
At the same time, China is becoming more lenient on its travel restrictions and its zero-COVID policy to help revive the ailing economy and return to normalcy. The much-awaited reopening of the Chinese economy and the final exit from its zero-Covid policy bodes well for all the Chinese stocks listed overseas.
While Tencent stock has taken a massive hit in recent years due to numerous issues, I continue to like the stock for various reasons. Tencent has a big competitive advantage in the gaming industry as it is vertically integrated. Its gaming operations span across the value chain with game development, game publishing, and game distribution verticals.
As per TipRanks, Tencent Holdings stock has received one rating over the past three months. Barclays analyst Jiong Shao assigns a Hold rating on Tencent Holdings with a price target of $36 (10.6% downside potential).
Like most Chinese stocks, Tencent Holdings has been out of favor due to many reasons like strict government regulations for the Chinese technology sector, the crackdown on monopolistic practices, and the possible delisting from the U.S., to name a few.
There are clear signs of a revival for Tencent as well as the Chinese economy in 2023. The stock could show a sharp recovery and reach or perhaps even cross its historical highs. I am bullish on TCEHY and will buy at current levels.
Tencent Music's parent company has nearly $275 billion in cash and short-term (ST) investments and considering the investments it made on its behalf, it's safe to assume that Tencent Music will be well cared for should the need arise. Tencent Music itself has nearly $4 billion in cash and ST investments, $842 million in debt, and is profitable, with earnings-per-share (EPS) of $0.38; incidentally, its EPS has gone up 51% annually over the last three years. The company has initiated a share buyback program over the next 12 months to the tune of $1 billion, its biggest ever.
In fiscal 2020, Tencent Music's mobile monthly active users (MAUs) for Social Entertainment Services declined 4.3% year-over-year (YoY) and its paying users dropped by 14.3%. Analysts are concerned that the reason for this is that competing services, like the massively popular TikTok, are taking market share away from the company. As the biggest growth and revenue generator for the company, this can spell trouble should this trend continue.
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Shares of Chinese internet giant Tencent Holdings Limited (OTCPK:TCEHY) (OTCPK:TCTZF) are down roughly 19% off of their highs since the stock peaked in mid-February. In this article, we'll explain why we think this is currently a great buying opportunity.
Picking individuals stocks is a lot like playing the lottery. The top best performing 4% of stocks accounted for the entire wealth creation of the US stock market since 1926, which means there were lots and lots of losing stock pickers. Are you sure TCEHY is going to continue its mind-blowing trajectory for the long haul?
If your money is burning a hole in your pocket and you need your TCEHY right now, choose this type. If stock markets are open, it will execute the trade immediately, or just as soon as the market opens next. The price you will pay will be right around the latest traded price for the stock, give or take a few cents per share.
While the U.S. stock market certainly did not perform great in 2022, the Chinese stock market was a total disaster. When looking at the Chinese companies I have in my portfolio, all of them performed horribly in 2022. And although most Chinese technology stocks outperformed in the last few weeks of 2022, we did not see a clear turnaround so far.
Mainland mutual fund families are asking investors for cash to buy stocks due to attractive valuations. Mainland fund flows have been dominated by money market funds and bond funds as active and passive equity inflows have stalled.
The Hang Seng Index and Hang Seng Tech Index fell -1.84% and -3.22%, respectively, on volume that was +21.94% higher than Friday, which is 103% of the 1-year average. Decliners beat advancers by 3 to 1 as short sale volume jumped +13.72% from Friday, which is 130% of the 1-year average. Value and dividend factors outperformed as consumer staples was the only positive sector, gaining +1.33%. On the downside, consumer discretionary fell -4.47% followed by energy and materials, which fell -3.27% and -3.01%, respectively, as mining and metal stocks were hit hard. Hong Kong-listed internet stocks led the most heavily traded by value as Tencent fell -2.29%, Meituan fell -3.31%, JD.com HK fell -8.21%, Alibaba HK fell -4.81%, and BYD fell -5.95%. Southbound Stock Connect reopened as Mainland investors bought Tencent and Meituan in size.
Shanghai, Shenzhen, and the STAR Board gained +1.06%, +1.53%, and +2.68%, respectively, on volume that was +26.57% higher than yesterday, which is 78% of the 1-year average. There were 3,317 advancing stocks and 993 declining stocks. Growth factors outperformed value and dividend factors along with small caps outperforming. The tech sector gained +2.4% led by semiconductors, utilities gained +2.35% led by solar and wind names, and industrials gained +2.14%. Meanwhile, energy was the only down sector, falling -3.3% led lower by coal names. Northbound Stock Connect reopened as foreign investors sold -$1.3 billion worth of Mainland stocks today. Treasury bonds rallied, CNY was off -0.09% versus the US dollar, and copper was off -0.43%.
I am the VP for American Association of Individual Investors & AAII Journal Editor. I am also the author of Better Good than Lucky: How Savvy Investors Create Fortune with the Risk-Reward Ratio (published by W&A Publishing/Trader's Press). I write about stocks, ETFs, investing and provides insight about individual investor sentiment as well as market and economic analysis.
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"Unless you think that the government or some external force is going to destroy 90% of their existing business, then I think it's a no brainer" to buy these stocks, he told CNBC's "Street Signs Asia" on Tuesday.
Tencent and Alibaba were among China's tech giants to bear the brunt of the government's regulatory crackdown, even as billions were wiped off tech stocks last year. Hong Kong-listed shares of Tencent plunged 46% year-to-date while Alibaba shares dropped 40% in the same period, according to Refinitiv data.
Tencent stock surged nearly 40% in November, following the clarification from its major shareholder. An announcement of Tencent distributing shares of food delivery company Meituan to its shareholders also propped the price.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Besides the risk of a ADR, suggest you take a look at demand and liquidity of the shares meaning number traded each day. You always need to be able to sell eventually to someone. Also US stocks are subjected to estate tax and also witholding tax if tencent gives dividends
TCEHY is an ADR, or American Depository Receipt, listed in the US to raise funds from the US stock market. Before buying it, you should familiarize yourself with the general issues surrounding ADRs/ADSs including the fact that US government regulators will not be able to ensure that the Chinese company's books will be audited to US standards (recently implicated in the Luckin Coffee scandal), and also consider the geopolitical risk associated with buying a Chinese tech ADR in the US . There is a reason why many Chinese companies are doing secondary listings on the HKSE, because of the non-zero probability of being forced to de-list in the next few years. One specific risk for TCEHY is that the Trump administration has issued an executive order banning US business transactions with WeChat, and it is not clear how this will be implemented (though it looks unlikely to affect TCEHY's US listing for now, it is potentially a pre-cursor of further US action against Tencent down the line). 041b061a72