Photographer: Qilai Shen/Bloomberg
Tencent’s $50 Billion Plunge Isn’t Enough to Scare AnalystsBy and
Asia’s largest stock has shed $50 billion in under 30 days
Investors remain upbeat on its gaming and social media clout
The Asian social media colossus has bled more than $50 billion of value since warning on March 21 of dwindling margins. Shortly after, it got caught up in a global selloff of internet stalwarts as investors fretted about the risk of regulatory tightening in the wake of Facebook’s Cambridge Analytica controversy. Then it came under pressure when the prospect of a trade war with the U.S. intensified. In the middle of all that, largest shareholder Naspers Ltd. declared it was unloading a $9.8 billion stake.
The 53 analysts who cover Asia’s largest stock are mostly standing firm. The gap between its shares and their average price target has ballooned to more than 20 percent. That’s the biggest increase in the disparity among peers from beleaguered Facebook to fellow Chinese internet giant Alibaba Group Holding Ltd., which like Tencent succumbed in part to fears about margin-erosion.
The average 12-month target price on Tencent remains at the highest it’s been in a year. Despite hints of lower profitability, many investors believe Tencent’s WeChat and game development prowess will help it sustain growth. That’s helped push its two-year earnings multiples to more than 34 times -- higher than peers from Alibaba to Baidu Inc., and 46 percent above the industry average.
Looming over Tencent however is the less-predictable impact of government regulators and censors, which maintain a careful watch over the country’s internet media. On Thursday, its shares slid a further 1.5 percent -- the most in a week -- hurt by signs that Beijing is deepening an ongoing crackdown on dissent and content deemed undesirable.