"Tencent 00700 delivered a strong third quarter, with revenue up 15% and recurring operating profit rising 18% year on year. Growth was driven by games and advertising, with continued AI investments contributing to performance. Management's outlook remains encouraging. Why it matters: Despite constraints on GPU purchases, advertising revenue growth accelerated to 21%, due to an upgraded advertising foundational model and new automated campaign tools that improved targeting and reach."
"This helps dispel concerns that US chip restrictions could derail Tencent's AI roadmap. Management reiterated that it has sufficient chips for internal use and doesn't prioritize external GPU rentals. International games revenue rose 43%. While some one-off factors contributed, the strength underscores Tencent's progress in gaining market share outside China and its efforts to diversify away from Chinese regulatory risks."
"The bottom line: We keep our fair value estimate for wide-moat Tencent at HKD 800. We view the shares as undervalued. Among its segments, we believe advertising offers the most significant growth potential, supported by our projected 14% five-year ad revenue compound annual growth rate. This growth is underpinned by more closedloop ads within the WeChat ecosystem, which command higher pricing. Additionally, advancements in large language models enhance understanding of ads, products, and users, resulting in better targeting and matching."
Tencent posted a strong third quarter with revenue up 15% and recurring operating profit up 18% year over year. Growth was led by games and advertising, supported by ongoing AI investments and an upgraded advertising foundational model. Advertising revenue accelerated 21% aided by automated campaign tools and AIM+ platform improvements that improved targeting, reach, pricing, and fill rates. Management confirmed sufficient chips for internal AI use and does not prioritize external GPU rentals, mitigating concerns about US chip restrictions. International games revenue climbed 43%, reflecting market share gains and diversification away from Chinese regulatory risk. Fair value maintained at HKD 800; shares considered undervalued.
Read at www.morningstar.com
Unable to calculate read time
Collection
[
|
...
]