Shares of Tencent Holdings Ltd. (HK:0700) jumped over 5% this morning after receiving approval for its much-awaited gaming title Dungeon & Fighter (DnF). The Chinese regulators approved the Mobile DnF video game that Tencent developed in partnership with South Korea’s Nexon (DE:7NX). Nexon’s shares were up 21% on Tokyo’s stock exchange as of writing.
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Tencent Holdings is one of China’s most valuable tech companies, offering social networking, music, web portals, e-commerce, mobile games, and internet services. Tencent shares have lost over 26% in the past year.
More About China’s Gaming Sector
The approval of DnF is seen as a green shoot that will add the much-required boost to Tencent’s gaming portfolio in 2024. Tencent’s DnF has been awaiting approval since 2020, at the height of a regulatory crackdown on China’s tech and gaming sector. Even now, gaming companies in the mainland are cautious of the new proposed rules that aim to prohibit the time and money spent on video games.
DnF is already released by Nexon in its home market and has proven to be a blockbuster hit. Even so, Nexon has withheld its launch in China owing to regulatory oversight. DnF’s launch in China will boost Nexon’s franchise income.
The stiff competition in the world’s largest gaming market has prompted Tencent to shift focus toward the artificial intelligence (AI) market. Gaming forms roughly 30% of Tencent’s group revenues.
Chinese regulators approved 32 imported online gaming titles, including Nintendo (OTC:NTDOY) Switch titles. The approvals put China’s gaming industry back in the limelight as companies had grown weary of the regulatory hindrances. Interestingly, the feedback period for the proposed gaming rules putting a curb on video game spending ended on January 22, following which this is the first public news from the authorities.
What is the Future Price of Tencent Stock?
Jefferies analyst Thomas Chong reacted positively to the news. Chong sees the DnF game approval as a positive catalyst for Tencent, as the market has been looking forward to its launch for a long time. The analyst believes that the regulators are supporting the gaming sector by approving a host of titles. Chong has a Buy rating on 0700 shares with a price target of HK$478 (76.6% upside).
Overall, with 11 Buys and two Hold recommendations, 0700 stock commands a Strong Buy consensus rating on TipRanks. The Tencent Holdings share price forecast of HK$424.21 implies 56.2% upside potential from current levels.
