Why is Tencent so Cheap?

This dramatic overreaction to regulatory risks could be your discount.

Andrew Willis 4 February, 2022 | 4:28AM
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Andrew Willis: Of all the potential outcomes for a Chinese technology giant under regulatory pressure, Tencent (TCEHY)’s current price suggests something that doesn’t seem to reflect the company’s sum-of-parts.

Investors are expecting regulatory issues to affect both video game and fintech businesses. But it’s is in the face of multiple growth drivers, from rapid overseas expansion in the video game space to double-digit annual ad growth, to an investment portfolio that generates an estimated 20% annual, to fintech revenue, which senior equity analyst Ivan Su estimates will hit a whopping 26% annual compound growth.

With such large market potential, signs of a stabilizing regulatory environment, and a stock price that doesn’t seem to have recovered yet, perhaps it's worth focusing on the strengthsthat got all this attention in the first place.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Tencent Holdings Ltd ADR38.94 USD1.91Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.


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