Tencent shares: Price analysis before buying or selling

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ISIN code: KYG875721634

Ticker: HKG: 0700

Index or market: HKG

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Elements to consider before selling or buying Tencent shares

Analysis N°1

We will follow for example the diversification of Internet use in China in different areas of everyday life and which could add sources of income to Tencent.

Analysis N°2

Tencent being above all a technological and innovative company, we will closely follow its expansion strategy based on the implementation of new services and the filing of new patents.

Analysis N°3

We will also follow the way in which Tencent tends to diversify its activities by focusing more on activities with the highest sources of income such as value-added services.

Analysis N°4

Of course, it will be necessary to keep an eye on the very strong competition of this sector of activity on a global level but especially in China.

Analysis N°5

We will monitor very strict laws and government policies in China and abroad and their evolution over time, which can thus influence the group's business activities.

Analysis N°6

Finally, we will of course follow the publications of annual and quarterly results by Tencent as well as the communications of strategic plans for this company

Analysis before buying or selling Tencent shares

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General presentation of Tencent

Now let's take a few moments to introduce you in more detail to Tencent and its various activities. This will allow you to understand what are the main sources of income for this group and thus anticipate the possibilities for growth.

The Tencent group is a Chinese investment company that mainly provides value-added or VAS services as well as online advertising services. This company carries out activities in several sectors which we invite you to discover now in more detail.

First, we find the value-added community services sector and applications on various Internet and mobile platforms. These activities represent around 53% of the group's turnover and relate in particular to the supply of online games.
Then come the activities related to Fintech and professional services which represent 26.9% of the turnover generated.
The online advertising sector, which is mainly engaged in display and performance-based advertising, generates 18.6% of Tencent's turnover.
Finally, the rest of the turnover comes from third-party activities such as payment services, cloud services and other services.

To date, the Tencent group employs 62885 people worldwide.

Photo credits: Chris Yunker

The major competitors of Tencent

Let us now take a few moments to analyze the sector of activity in which the Tencent group operates and which, as we have just seen, concerns several segments. In this sense, Tencent faces several big competitors of which here is a quick presentation:

NetEase Inc: This is a Chinese internet company which is notably in charge of the operation of 163.com, a Chinese web portal. This company has also invested in a search engine and in the online gaming sector.

Baidu

It is also one of the most important Chinese companies in the web sector. Its search engine is particularly popular in the country. Of course, Baidu generates most of its turnover through online advertising revenues.

Alibaba

Another Chinese giant listed on the stock market whose main source of income comes from online activities including a public market for business-to-business exchanges, payment and retail platforms, a search engine and cloud services computing.

Renren

This Chinese company is a social network listed on the stock exchange and which we used to know under the name of Xiaonei.

Google

On the international level, we must of course also count on competition from Google, which offers technological and online services worldwide and which is a subsidiary of the Alphabet group.

Microsoft

This other American giant is a multinational computer company listed on the stock market and which employs more than 148,000 people in more than 120 countries.

Sony

Sony Corporation is another competitor to Tencent, particularly in the online gaming segment. It is a Japanese multinational.

The major partners of Tencent

After having reviewed the various competitors of Tencent, let's move on to an analysis of its partners with some examples of strategic alliances that this group has been able to set up in the past:

Carrefour

In 2019, the Carrefour group announced an investment project with Tencent and Yonghi in Carrefour China. This operation aims to combine the French group's know-how in the field of distribution with Tencent technology and Yonghi's expertise. At the end of this transaction, Carrefour nevertheless remains the largest shareholder in Carrefour China. This partnership also includes a strategic cooperation agreement between Carrefour and Tencent in China aimed at improving the online visibility of the French brand in China.

Burberry

Also in 2019, it was with the luxury giant Burberry that the Tencent group set up another strategic partnership. The British group indeed wishes to develop its retail sales in China thanks to this alliance which will give rise to a pioneering concept which combines social media and retail with the aim of creating online and offline spaces which bring customers to engage, share and buy.

Disney

Finally, still in 2019, it was with Disney and Lucasfilm that Tencent partnered in order to allow the Chinese public to be reached by the Star Wars franchise. It was through the Tencent China Literature subsidiary that this agreement was implemented. This subsidiary is indeed dedicated to digital books and online publishing. China Literature will distribute around forty novels from the saga translated into Chinese. The partnership also calls for Dinsey and China Literature to collaborate on the publication of the first online Star Wars novel written by a Chinese author.

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The factors in favour of a rise in the Tencent share price:

In order to know how the Tencent group is likely to evolve over time and what is its capacity to support or not its growth and to face the various hazards that await it, it is important to know its main strengths and weaknesses, i.e. the advantages and disadvantages of this value. Here is a quick comparison of these strengths and weaknesses.

Let's start this analysis with a summary of the main strengths of the Tencent Group, which are all arguments in favour of a rise in its share price in the more or less long term.

First of all, the Tencent group is a group that relies heavily on innovation to underpin its development and future growth. Indeed, the holding company benefits from an excellent research and development facility in which more than half of its employees are employed and it makes numerous investments in this area.
The group also has the advantage of having a well-diversified business portfolio, which allows it to protect itself effectively against sectoral risks. Indeed, it provides different types of services on the Internet and can thus attract a diverse customer base by catering to different needs.
Tencent is also a group that manages to stand out from its competitors in certain segments where its presence is particularly strong. This is the case in the field of instant marketing. The group has indeed developed numerous solutions in this specific segment and currently holds and exploits numerous patents under its own name.
On the Chinese market alone, the group has been positioned for several years as the undisputed leader in the Internet services sector and occupies a predominant and very strong position in this sector throughout the country, to the point that one could almost speak of a monopoly.
Among the strengths of the Tencent group, we can of course talk about its very impressive stock market value. Tencent currently has a market value of over 500 billion US dollars, and its stock price is constantly rising.
The Tencent Group is increasingly positioning itself in certain future sectors such as artificial intelligence, robotics and fintech solutions. Thus, it is preparing to become a leader in new technologies by investing heavily in research in these areas.
One of the main signs of the success that the Tencent group is currently experiencing concerns its particularly strong positioning in certain geographical sectors and strategic markets. For example, Tencent has recently experienced strong growth in certain emerging economies outside China, such as India.
Finally, the group's financing and its consistent investments guarantee it a healthy and solid financial situation over time with the capacity to make new strategic acquisitions and other strategic financing.

The factors in favour of a drop in the Tencent share price:

Of course, the Tencent Group has not only advantages and qualities but also some weak points that you should be aware of and that can influence its stock price downwards and discourage investors. Here are its main flaws and disadvantages:

First of all, the Tencent group is mainly present in China where it still makes the vast majority of its revenues. This strong domestic presence is therefore a disadvantage in that it makes it more vulnerable and more exposed to the risks, if any, associated with the country and its economy.
The group has also recently faced new competition that was virtually absent from the Chinese market a few years ago. Indeed, with the increasing competition from several online portals, its market share is likely to shrink significantly in the coming years.
Among the group's various weaknesses is the fact that the Chinese stock market remains relatively closed and lacks transparency for foreign investors. The group is also still very much influenced by the Chinese government and therefore cannot take free decisions to boost its growth without going through the very strict regulations of this country.

An active comparison of these major advantages and disadvantages of the Tencent Group will help you to see more clearly its capabilities for the future. But you should only use them as a basis for your fundamental analysis to anticipate the effect that these elements may have in the context of major events or following the release of results by assessing the group's ability to strengthen its strengths and reduce its weaknesses. In this way, you will have a better chance of knowing how the group and its work will progress.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions or a solicitation to buy or sell an asset.

Frequently Asked Questions

How to analyze variations in the Tencent share price?

To make a good analysis of the Tencent share price, you should ideally combine two types of analysis. Of course, this is the technical analysis which uses the graphs and the various indicators, and the fundamental analysis with the study and interpretation of the elements and publications of the news likely to influence this title and investors who speculate on it.

Where can I find information about Tencent and its results?

Although the Tencent group is a Chinese group, it is quite easy to obtain clear and transparent information about its news, its financial results or its strategic forecasts. For that, you just have to go to the part of the site of this company reserved for the investors or to consult the card of this title at your broker.

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Analysis before buying or selling Tencent shares