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Investors ask what is plaguing Tencent as stock goes downhill since failing to reach US$1 trillion in market cap
- Tencent’s third-quarter net income is expected to fall 36 per cent and revenue by 0.2 per cent, according to analysts’ estimates polled by Bloomberg
- The WeChat operator’s shares have fallen 46 per cent this year, taking the decline to 68 per cent from an all-time high in January 2021
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Zhang Shidongin Shanghai
Pony Ma Huateng, the chairman and founder of Tencent Holdings, has kept a low profile since his last known public comments about the company in August. Limiting his views to shareholders and the media, the billionaire has pledged to explore new sources of revenue and streamline operations.
None of that has materialised.
Growth in Tencent’s key business units has stagnated, its biggest foreign shareholder Prosus is selling down, and investors have lost US$650 billion in equity wealth since the WeChat operator failed to become the first trillion-dollar Chinese company after the tech-sector crackdown.
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“Growth won’t be as fast as before, like 30 per cent or 50 per cent,” said Shawn Yang Zixiao, the Shenzhen-based deputy research head and a managing director at Blue Lotus Capital Group, a boutique investment bank. “Single-digit growth or 10 per cent growth would be more achievable going forward. The result will be pretty weak this year and that’s attributed to the macro environment and Tencent’s own business operations.”
Yang, who previously worked at HSBC Global Asset Management, was accurate about his call on Tencent in October last year, when he cut the rating on the stock to sell from buy. He revised the recommendation to buy in August, citing attractive valuation and pricing in of most of the headwinds.
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