China-based Tencent Holdings Limited (HK:0700) (TCEHY) delivered strong profit growth in Q3, surpassing analysts’ expectations. The company’s net profit soared 47% year-over-year to ¥53.23 billion, well above the average estimate of ¥45.12 billion, according to a Visible Alpha poll. Further, revenue rose 8% year-on-year to ¥167.19 billion. Tencent shares gained 0.64% in today’s session.
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Tencent Holdings is a technology company offering digital entertainment and internet value-added services.
Tencent Thrives on Gaming Success
Tencent’s Q3 success was primarily fueled by the growth of its Gaming segment, following the recent release of new titles. The company’s domestic gaming sales grew 14% to ¥37.3 billion, driven by its popular games like Honor of Kings and Peacekeeper Elite. Meanwhile, the company’s International gaming revenue rose 9% to ¥14.5 billion. Q3 also marked the first full quarter contribution from Tencent’s hit title Dungeon & Fighter Mobile, released this summer. Overall, the company’s online gaming revenue increased 13%.
Citi analysts believe Gaming will remain a major revenue driver for Tencent in the coming quarters. They further highlighted Tencent’s strong lineup of 78 mobile games set for release next year, with 46 already approved by China’s video game regulator.
On a less positive note, Tencent’s Advertising and Fintech segments registered slower growth due to China’s weakening economy and subdued consumption. Online advertising sales grew 17% compared to a 19% rise in the previous quarter, while fintech sales saw a modest 2% year-over-year increase.
Is Tencent Holdings Stock a Buy?
According to TipRanks’ rating consensus, 0700 stock has received a Strong Buy rating, backed by 14 Buy and one Hold recommendation. The Tencent share price forecast is HK$523.93, which implies an upside of 30% on the current trading level.
