Tencent: Valuation Benefit Outweighs Risk Premia

Cavenagh Research
9.44K Followers

Summary

  • Tencent stock is down about 44% since I have last covered the company and assigned a 'Buy' recommendation.
  • But I continue to believe that investors should 'Buy' Tencent and 'focus on the long-term'.
  • As I argue in this article, Tencent's fundamentals should already be improving versus Q2 2022.
  • Although I acknowledge the paramount risk connected to a TCEHY investment, I believe valuation benefits outweigh risk concerns.
  • To reflect new information, I update my residual earnings model for TCEHY. I now calculate a fair implied share price of $50.47 versus $58.51 prior.

Tencent logo on Silicon Valley office a Chinese multinational conglomerate holding company

Michael Vi

Thesis

Tencent (OTCPK:TCEHY) stock is down about 44% since I have last covered the company and assigned a 'Buy' recommendation. Arguably, my positive assessment of the situation - especially the thesis of improving sentiment towards China-based equities - proved wrong. But as I have

This article was written by

9.44K Followers
Experience as an investment analyst for a major BB-Bank, as well as private equity consultant for MBB. Currently working towards the CFA charter, having completed I&II. Passion for risk-assets (Growth, Contrarian, Emerging Market) ex-colleague and close friend of Investor Express

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not financial advice.

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