Stock (Symbol) |
Tencent Holdings (TCEHY) |
Stock Price |
$55 |
Sector |
| Technology |
Data is as of |
| January 11, 2018 |
Expected to Report |
| Mar 21 |
Company Description |
 Tencent 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 |
 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. Tencent’s qtrly profits have accelerated to rapid growth mode. The last 4 qtrs the company has punched out 45%, 47%, 71% and 81% profit growth. This is a big company, with a higher market cap than Alibaba. That’s impressive! I consider 60% profit growth rapid growth mode, and it’s where the top stocks reside. Looking Tencent’s segment breakdown:
Tencent is the “all in one” company with its own versions of Facebook, Google, Netflix and Amazon rolled into one app. This is a fantastic company that’s grown profits at least 20% every single year since it went public in 2008. This is one of the top growth stocks in the world, yet many American investors are still completely unaware of it. Yet I have a word of caution: the stock’s extended on the charts and although the trend is your friend which suggests the stock will go higher, the rapid run-up will make it a target for a +20% pullback if the stock market corrects. In the meantime this is one of the best stocks in the world. It’s doubling sales every two years. Tencent reminds me of Microsoft back-in-the-day. Up next: WeChat will be a worldwide leader in financial transactions. |
One Year Chart |
 Last qtr TCEHY delivered 81% profit growth, which beat estimates of 56%. WOW! Sales jumped 61%. 2018 estimates have grown from $1.09 to $1.17, $1.27 and $1.36 the last 4 qtrs — that’s a key stat! Qtrly Estimates are for 69%, 41%, 14% and 21% profit growth the next 4 qtrs. The Est. LTG just increased from 32% to 36% and now 40% the last few qtrs. |
Fair Value |
 This Fair Value is only a P/E of 45, but with profits and sales popping this stock could get a P/E of 60 this year. And what will the company earn? 2018 estimates have jumped from $1.09 to $1.36 and we aren’t even into fiscal 2018 yet. Can it earn $1.75 and get a 50 P/E? Or make $2.50 next year? 50 times two-fifty would be a $125 stock. This stock’s in the $50s. |
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. This stock was undervalued for years, and has now caught up to where it should be, and that’s why the chart is pointed up. Thus, I feel TCEHY could take a big dip on profit taking, but the long-term opportunity is very bright. TCEHY ranks 3rd in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. This is a FANG-type of investment you buy-and-hold. But if I were looking to take a position, I would buy half now and half later. |
Power Rankings |
Growth Stock Portfolio
3 of 39Aggressive Growth Portfolio 3 of 16Conservative Stock Portfolio N/A |
