Why Tencent Rose Today

Core Insights - Tencent's stock experienced a rally, increasing by as much as 3.4% before settling at a 0.7% gain [1] - The company reported strong earnings that exceeded analyst expectations, indicating positive momentum for investors [3] Financial Performance - In Q4, Tencent's revenue grew by 11% to RMB 172.4 billion (approximately $24 billion), with adjusted earnings per share at RMB 5.909 ($0.82), both surpassing analyst estimates [4] - The revenue growth in Q4 marked an acceleration compared to the full year's growth of 8% [4] Market Segments - Domestic video game revenue increased by 23% year-over-year, while international gaming revenue grew by 16% [6] - Marketing revenue, which includes digital advertising across WeChat and other platforms, rose by 17% [6] - The fintech and business services segment lagged with only 3% growth, although there was modest growth across all elements of that segment [6] User Growth and Dividends - WeChat users grew by 0.2% quarter-over-quarter and 3% year-over-year, indicating continued user engagement [7] - Management announced a 32% increase in dividends and plans for ongoing share repurchases in 2025 [7] Valuation - Despite an 87% rally over the past year, Tencent's stock is still trading below its all-time highs from early 2021 [8] - The company's headline P/E ratio is 24.5 based on full-year 2024 diluted earnings, but when excluding its investments in other companies, the trailing P/E ratio drops to 19.7 [9] - This valuation remains attractive compared to U.S. tech giants, which typically have trailing P/E ratios in the mid-20s to mid-30s range or higher [9]