Tencent is now the most valuable social media company as share price rallies
With a market cap of $667.6 billion, Tencent emerged as the biggest social media company ahead of Facebook on Wednesday with upsides still expected ahead of its Q2 earnings release.
Investors bullish on Tencent with gaming revenue
Tencent shares had seen an impressive surge since the second quarter (Q2) of 2020 riding on the latest Covid-19 influence on consumer behaviours that looks to boost revenue performance. The online services company had risen 44.2% on a year-to-date (YTD) basis and clocked 31.1% jump for prices in Q2 alone. This had marked the biggest quarterly jump for prices seen since Q3 2013. Ahead of Q2 earnings results, Tencent had seen 8.6% rise as of Wednesday, 29 July, sustaining the bullish momentum for the prices. Likewise, with the rise in market capitalisation, Tencent had surpassed that of Facebook, part of the US Fang stocks, which totalled $656.2 billion in market capitalisation as of Tuesday’s close.
Tencent draws the majority off its revenue out of mainland China, half of which is stemming from the value-added services segment. This consists primarily of online and mobile games across both internet and mobile platforms. Honour of Kings, Brawl Stars are just some of the popular titles in Tencent’s library of online game offerings, the latter only accounting for a small part of Q2 performance but had nevertheless been touted as a high revenue grossing , seeing the surge in popularity at initial offering on China’s Apple store.
According to CPC-CNG estimates, as reported by Bloomberg, the Chinese online game industry sales had grown by 9% in H1 of 2019, which marks an acceleration from 5% in 2018. This comes across with little surprise as the stay-home trend continues amid localised Covid-19 outbreaks. The increase in engagement across a wider pool of consumers through the pandemic thus far is also expected to have built a stronger client base.
Meanwhile, Tencent as a social media company also has the widely popular WeChat app in its arsenal, among others, that represent significant monetisation opportunities which is why we continue to see further upsides expected from the market. Current Refinitiv consensus target price sits at $552.36 (HKD), above the last price seen on Wednesday at $541.50, although this number itself had been gradually shifted up as the Covid-19 pandemic lingers.
|Revenue (2019)||Geography||Revenue (2019)|
|Value-added services||53%||Mainland China||96%|
|FinTech and business services||27%||Others||4%|
Tencent share price: technical analysis
Tencent shares had seen a strong rally since March 2020, breaking above the $515.00 resistance level into the start of July. That said, the prices appeared to have entered a short-term consolidation zone of between $515.00 and around $560.00, gathering strength here. Watch for a firm breakout above the latter to open further upsides in the current trend. A break below $515.00 may, however, mark a definite pause in momentum here, although the prices could stall ahead of the Q2 earnings release, currently expected on 12 August.
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.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets