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Naspers and Prosus share price react to Tencent

In the below article we take a look at Tencent results and how its holding companies Naspers and Prosus have reacted to the earnings release.

Tencent Holdings results

Hang Seng listed internet and gaming giant Tencent Holdings Ltd results have shown strong revenue and earnings growth albeit at a slightly slower pace than in the preceding quarter

A summary of the Q4 2020 results are as follows:

  • Revenue increased by 26% year on year (y/y)
  • Operating margin 28%
  • Diluted earnings per share up 27% y/y
  • Gaming revenue increased by 29% y/y
  • Social networking revenue increased by 27%
  • Online advertising revenues increased by 22%
  • Fintech revenues increased by 29%

Tencent Holdings: technical analysis

The share price of Tencent has grinded lower from its recent highs. The grind lower has taken the shape of a falling wedge formation. The pattern suggests a weak move lower after a strong move higher, expectant of renewed gains to follow. The share price also trades around oversold territory.

The pattern and oversold signal implies a resumption of short term gains to align with the longer term uptrend. In this scenario, 680 and 725 provide initial upside targets, while a close below trendline support at 580 would suggest the bullish pattern to have failed.

Naspers Ltd: technical analysis

Similarly to its Tencent counterpart, the share price of Naspers Ltd has also produced a falling wedge formation from recent highs and trades around oversold territory.

The pattern and oversold signals imply a resumption of short term gains to align with the longer term uptrend. In this scenario, 3625 and 3834 provide initial upside resistance targets, while a close below trendline support at 3220 would suggest the bullish pattern to have failed.

Prosus NV (JSE listing): technical analysis

The share price of Prosus NV currently trades near trend line support while in oversold territory. Traders looking for a long positioning into Prosus might prefer to wait for a bullish price reversal to form with a sharp move out of oversold territory. In this scenario 1750 and 1810 would become initial upside resistance targets from the move, while a close below the major low at 1542 would suggest the failure of the move.

In Summary

  • Tencent revenue and earnings growth for the fourth quarter robust
  • Operating margins maintained
  • Growth was at a slightly slower pace than in the preceding quarter
  • Fintech, online advertising, gaming and social networking divisions all continued to produce strong revenue growth
  • A technical analysis view shows Tencent, Naspers and Prosus to look oversold in a longer term uptrend

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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