fbpx

Tencent is Taking the World By Storm

Stock (Symbol)

Tencent Holdings (TCEHY)

Stock Price

$36

Sector
Technology
Data is as of
July 11, 2017
Expected to Report
Aug 16
Company Description
tencentTencent Holdings Limited is an investment holding company. The Company and its subsidiaries are principally engaged in the provision of Internet and mobile value-added services (VAS), online advertising services and eCommerce transactions services to users in the People’s Republic of China. The Company operates in four segments: VAS, Online advertising, eCommerce transactions, and Others. It also engages in the provision of trademark licensing, software development services and sales of software. Its subsidiaries includes Tencent Computer, Tencent Technology, Shiji Kaixuan, Tencent Cyber (Tianjin) Company Limited (Cyber Tianjin), Tencent Asset Management Limited, among others. Source: Thomson Financial
Sharek’s Take
David SharekFounded in 1998, Tencent (TCEHY) is China’s largest and most used internet service portal. Tencent’s brands include WeChat, QQ Instant Messenger, QQ Music, QQ Games, Qzone, and Tenpay. WeChat has approximately 1 billion monthly active users, and allows you to text/chat with your friends like you do on WhatsApp but WeChat has grown to encompass everything you do online. Believe it or not, Tencent derives approximately 45% of its revenue from online video games, with Tencent & Netease controlling around 3/4 of China’s mobile game market. TCEHY’s second biggest division is social networks where users pay for content like music and movies and can subscribe to skip ads. Online ads is the third largest division. The company also derives revenue from electronic payments and cloud services — which are growing rapidly. Tencent is the “all in one” company with its own versions of Facebook, Google, Netflix and Amazon rolled into one app. The company grew revenue 55% last year and profits surged 47%. This is a fantastic company that’s grown profits every single year since it went public (2008) at 35% per year on average. This is one of the top growth stocks in the world, yet many American investors are still completely unaware of Tencent. This is a major position in my Growth Portfolio and Aggressive Growth Portfolio and I intend on adding to my investment as profits are expected to grow 42% a qtr the next 4 qtrs.
One Year Chart
Tencent’s financials are astounding. Green across the board other than the P/E which is 39, up from 35 last qtr (it was green then). 2QtrsAgo TCEHY missed by 2 cents, and Annual Profit Estimates fell a little, but this qtr the company beat by a penny and estimates rose a little. I think this little detail will work wonders for the stock its very tough to be a top-tier growth stocks when you’re not beating the street and upping estimates. Qtrly profit Estimates are outstanding: 35%, 50%, 50% and 32%. That’s possibly two qtrs of 50% growth? WOW! The Est. LTG is a robust 32%
Fair Value
This Fair Value chart is a beautiful picture. I should print it and frame it in my office, but I didn’t own the stuck until 2016. My Fair Value is 40x earnings, which makes the stock fairly valued here with +30% upside for 2018.
Bottom Line
Tencent gives investors an “all in one” investment in the Chinese Internet space. Profits have grown at a good clip every year since the company went public. The only negative is the stock is slightly extended after the recent run. TCEHY ranks 3rd in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. This looks to be one of those FANG-type investments that you buy-and-hold.
Power Rankings
Growth Stock Portfolio

3 of 33

Aggressive Growth Portfolio

3 of 16

Conservative Stock Portfolio

N/A

Not a member? Sign up here for $25 a month.