A pedestrian walks past Tencent Holdings Ltd.’s new under construction headquarters, left, in Shenzhen, China. (Photographer: Qilai Shen/Bloomberg)

Here Are the Analyst Reactions to Tencent's Blowout Earnings

(Bloomberg) -- Analysts raised price targets on Tencent Holdings Ltd. after the company’s third-quarter earnings topped even the most optimistic of estimates. 

At least 12 brokerages have boosted their targets on the stock, according to data compiled by Bloomberg. Essence Securities holds the most bullish view at HK$520.80, implying a gain of 34 percent in the next 12 months for the Chinese tech giant, whose shares have more than doubled in value this year.

Goldman Sachs Group Inc. (raises target 19% to HK$438 from HK$369)

  • PC revenue was a positive surprise for the third quarter in a row, thanks to content updates and engagement-enhancing initiatives, analysts including Piyush Mubayi write
  • Snap stake could be “transformative” over time given Tencent’s product focus. Messaging/social platforms such as Snap are poised to monetize traffic

Nomura Holdings Inc. (boosts target 21% to HK$458 from HK$380)

  • Tencent Video has gained traction and achieved online video leadership thanks to the company’s huge library of both original and exclusive licence content, write analysts including Andrew Orchard
  • Adjusted operating margin remains on a downward trend
  • Impact from ad system revamp could continue in the fourth quarter

Jefferies Group LLC (lifts target 10% to HK$445 from HK$405)

  • Strong enthusiasm for Tencent’s mobile survival games as China’s mobile gaming becomes increasingly social-driven, write analysts including Karen Chan. They estimate the company’s mobile game growth will be 71% in 2017 and 34% in 2018
  • Cross-media IP strategy drove synergy across content-related business and company is leveraging China Literature as a key source of IP
  • Near-term effect of optimization-led ad inventory reduction on newsfeed doesn’t change long-term view on Tencent’s ad share gain
  • Boosts 2017 revenue, earnings estimates by 2.2% and 1.5%, and 2018 by 5.3% and 2.8%

HSBC Holdings PLC (boosts target 22% to HK$454 from HK$373)

  • Impressive revenue growth thanks to gaming, video and payment
  • Video and game pipeline shows strong momentum

CICC (boosts target 11% to HK$450 from HK$406)

  • Improved ad fill rate in Weixin moments shows encouraging signs for growth potential, writes analyst Natalie Yue Wu
  • Honour of Kings strength to continue; survival shooter games could keep driving revenue growth
  • User stickiness will increase, with Weixin enriched with successful trials of Mini program

Daiwa Securities Group Inc. (raises target 30% to HK$480 from HK$370)

  • “Tencent’s disciplined execution and well-positioned multi-engine growth strategy should sustain its valuation premium in the medium to long term,” analysts including John Choi write in note
  • Earnings upside in 2018 thanks to robust mobile game pipeline, incremental revenue from WeGame platform and increasing online ad monetization

Essence Securities (sets target at HK$520.80)

  • 3Q beat estimates due to strong mobile game business growth, writes analyst Patrick Choi
  • Positive on strategy to focus on mobile games in near-term, fintech in mid-term and AI in long-term

UOB-Kay Hian (maintains buy with target price of HK$437)

  • Raises top-line estimates on better-than-expected game revenue growth and strong outlook for content driving platforms in 2017 and 2018, analysts including Julia Pan write in note
  • Mobile-based digital content businesses are synergistic
  • Monetization potential of survival shooter games could be low as these types of games tend to offer a fair competitive environment for both paying and nonpaying players

Tencent’s shares are up 1.7 percent at HK$389 as of 10:28 a.m. in Hong Kong.

©2017 Bloomberg L.P.