Tencent's Business Model Amid Multiple Challenges

Nov. 28, 2022 4:16 AM ETTencent Holdings Limited (TCEHY), TCTZF6 Comments
Piotr Kasprzyk profile picture
Piotr Kasprzyk
730 Followers

Summary

  • Fundamentally, Tencent is an extraordinary business worth at least what it's trading for.
  • With strong financials, high margins, sound management, broad diversification, and a position in the market, Tencent is poised to steadily grow revenues and earnings for the next decade.
  • Regulations and a more state-oriented approach can substantially curb Tencent's prospects and expansion. Chinese demographics are also a big issue. Also, COVID restrictions are present and adversely affect the company.
  • Tencent has remained very opportunistic and strategic about its operations. Even in such a tough environment, the company managed to generate growth in some branches of its business.

Building of TENCENT company in Shenzhen, China

Nikada

Tencent (OTCPK:TCEHY, OTCPK:TCTZF), the most valuable Chinese company and one of the biggest enterprises globally until recently, has continued seeing its market cap drop since February 2021. The primary reason for the ongoing sell-off is the overall negative

Tencent Revenue by Segment

Tencent's Revenue by Segment Since Q1 2019 (Tencent)

A Day in the Life WeChat Weixin

A Typical Day for a WeChat User (fleximize)

Tencent Online Advertising

Tencent's Advertising Business (Tencent)

Global Entertainment and Media Spending

Share of Global E&M Spending (PwC)

China cloud infrastructure services spend in 2021

China Cloud Infrastructure Services Spend in 2021 (chinainternetwatch)

Tencent Valuation DCF

Tencent Discounted Earnings Model (Author: Data from Seeking Alpha)

This article was written by

Piotr Kasprzyk profile picture
730 Followers
Long-term equity investor with a main focus on technology and consumer discretionary sectors with a high long-term growth potential.Highly-selective when making investments.

Disclosure: I/we have a beneficial long position in the shares of TCEHY either through stock ownership, options, or other derivatives. 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.

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