Tencent's $292 Billion Rally Ousts Facebook From Global Top Five

  • Chinese firm is now the world’s most valuable social network
  • Mega-rally this year is stretching its stock valuations

Our Social Media Accounts Are Driving Us Crazy

Tencent Holdings Ltd. has surpassed Facebook Inc. in market value, becoming the first Chinese technology company to join the ranks of the world’s five largest corporations.

Investors piled into the Chinese social networking giant, extending this year’s rally to 127 percent and boosting its market value by some $292 billion as of Tuesday’s close. That year-long surge has made founder Ma Huateng the mainland’s second-richest man and lifted the entire Hong Kong bourse. The operator of the ubiquitous WeChat messaging service is now valued at $523 billion, a whisker above Facebook’s $522 billion on Monday.

Investors are betting that Tencent can lean on its billion-plus users and hit games like Honour of Kings to evolve into an advertising and entertainment titan along the lines of a Google or Facebook. Created almost two decades ago as a web portal before morphing into one of the world’s biggest purveyors of video games, the argument is that its dominance of Chinese social networking also bankrolls an expansion into newer markets from video streaming to finance.

Tencent’s climb however has stretched historical valuations. It’s now trading at more than 50 times forward earnings, higher than an average of roughly 30 over the past two years. Of the four companies on the planet that are larger -- Apple Inc., Alphabet Inc., Microsoft Corp. and Amazom.com Inc. -- all but Jeff Bezos’ perennially margin-challenged e-commerce juggernaut are valued at much less. 

Tencent, which has no sell ratings, is now also just 2.4 percent below the HK$440.64 average price target of 36 analysts surveyed by Bloomberg, whereas analysts expect Facebook to rise another 16 percent in the next 12 months.

Tencent wouldn’t be the first Chinese corporation among the world’s biggest. Investor enthusiasm for a raft of newly listed government-run entities inflated the valuations of old-economy names such as Industrial & Commercial Bank of China Ltd. in the last decade. PetroChina Co. in 2007 became the world’s first $1 trillion company.

— With assistance by Matthew Burgess

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