Morgan Stanley said that of all Chinese internet stocks, one company offers investors “the best risk reward.” According to the bank, this is tech giant Tencent. The company owns games, online advertising, and the chat app WeChat. It called Tencent a “safe haven” and listed it as its top choice in the field. Morgan Stanley raised Tencent’s price target from HK$450 to HK$480 (US$57.80 to US$61.70). This represents a potential upside of around 12%. “We believe Tencent has the best risk-reward profile among Chinese internet stocks, with structural drivers in gaming, share price growth across segments and higher profitability,” the bank said in a Sept. 25 report. Visibility”. Referring to Tencent’s stakes in other companies, Morgan Stanley analysts wrote: “If China’s internet industry continues to rebound, we also believe the potential monetization of the listed portfolio ($79 billion as of 2Q24) will Further upside. According to the 2024 interim report, Tencent invests in fintech and retail, cloud and artificial intelligence, social and digital content areas. Even after the recent rebound, Tencent’s valuation is still “not high”. 13 to 14 times 2025 earnings. Its shares have surged since mid-September, rising from about HK$374 to currently HK$424. As for its gaming unit, Morgan Stanley said the company will enjoy “near-term catalysts.” , adding that there will be a “robust” pipeline and that its Evergreen Games will continue to achieve net growth. Tencent Games revenue is expected to increase by 13% and 10% respectively in the second half of this year and 2025, the bank said. Even if the macroeconomic situation is weak, Tencent’s advertising growth will remain “resilient” and its market share will still grow. It is estimated that advertising revenue will grow by 14% in the second half of this year and 15% by 2025). Tencent is one of the biggest beneficiaries of small games due to its leading position in game publishing, and it also has “huge potential” to capture higher advertising spend from Alibaba amid intensifying competition, the bank added. —CNBC’s Michael Bloom contributed to this report.
