Tencent Holdings Ltd (TCEHY, Financial) experienced a moderate increase in its stock price today, climbing by 0.14% to $69.59. This movement was largely influenced by the company's robust earnings report, which managed to surpass market expectations in both revenue and earnings.
In the latest earnings release, Tencent reported a significant 11% rise in revenue, reaching approximately $24 billion. The company's adjusted earnings per share (EPS) came in at $0.82, exceeding analyst predictions and marking an improvement from the prior annual growth rate of 8%.
A notable area of growth for Tencent was its domestic video game segment, which saw a 23% increase year-over-year, while its international gaming revenue also climbed by 16%. Additionally, marketing revenue, which includes digital advertising across Tencent's popular WeChat platform, rose by 17%. However, the fintech and business services divisions posted a modest growth of 3%. WeChat, which continues to play a crucial role in Tencent's ecosystem, recorded a slight 0.2% user increase from the previous quarter and a 3% increase year-over-year.
Following the positive earnings results, Tencent announced a 32% hike in its dividend and reiterated its commitment to continue share repurchases in 2025. Despite a rally of 91.9% over the past year, Tencent's stock remains below its peak levels from early 2021.
From a valuation perspective, Tencent's trailing Price-to-Earnings (P/E) ratio stands at 27.96. This metric reduces to 23.68 when adjusted for the company's substantial holdings in other firms, valued at approximately $126 billion. According to GF Value, the stock is currently deemed "Significantly Overvalued," with a GF Value estimate of 47.78.
Despite some areas of concern, such as a decline in operating margin over the past five years, Tencent remains financially robust, demonstrated by a strong Altman Z-Score of 5.06. Additionally, its Piotroski F-Score of 7 indicates a healthy financial state, and the Beneish M-Score suggests the company is unlikely to be a financial manipulator.
Tencent's market capitalization is $632.99 billion, with a forward price-to-earnings ratio of 18.87. As the largest internet service company in China and a global leader in various segments, Tencent continues to be a significant player in the market with strong future growth potential.
