Tencent Stock Analysis - Massive Opportunities Ahead

in this video we're analyzing tencent stock tencent is the largest gaming company in the world owning and investing in major games including league of legends clash of clans and fortnite however tencent is much more than a gaming company with massive opportunities ahead in their wechat ecosystem investment portfolio and business services let's start with 10 cents wechat ecosystem tencent owns wechat one of the largest messaging platforms in the world with 1.23 billion monthly active users wechat is considered a super app because of all the different features and functions available within the one mobile app in addition to messaging people use wechat for payments shopping ride hailing food delivery and much more the main feature that allows people to access all these different functions is wechat mini programs tencent allows other companies such as jd.com meitwan and billy billy to develop many programs on wechat that serve as another way for users to engage with their platforms for monetization tencent generates revenue from these platform transactions by offering wechat pay as one of the main payment methods in 2020 daily active users for wechat mini programs increased by 33 percent to 400 million per user the number of mini programs used rose by 25 year-over-year and the average transaction value increased 67 year-over-year meanwhile the gross merchandise value of wechat mini program transactions doubled year over year to roughly 247 billion dollars in 2020 making 10 cent in a way one of the largest e-commerce companies in the world wechat search wechat's built in search function and wechat mini games both reached 500 million monthly active users with total mini game revenue increasing 20 year of year in march 2021 it was announced that wechat would offer taboo deals alibaba's social ecommerce platform as a wechat mini program in this initiative table deals will accept payment transactions from wechat pay this marks a major turning point in the relationship between tencent and alibaba given that the two companies are major competitors and have historically closed off their ecosystems with one another if the two companies can continue to open up their ecosystems to each other this could create more value for customers and for the two companies on the topic of wechat mini programs tencent's mini program strategy is especially effective because they not only partner with other companies but invest in companies that develop mini programs for wechat this brings us into the next major opportunity for 10 cent their investment portfolio 10 cent is one of the largest and most successful tech investors in the world at the end of 2020 the fair value of 10 cents investments in public companies increased 187 year-over-year to 185 billion dollars overall tencent reportedly made over 1 200 investments worth 280 billion dollars in 2020 10 cents investments outperformed the overall stock market by a wide margin with equity investments such as jd.com pindorado maituan billy billy futu and neo increasing multiple fold in 2020. what's common across many of these outperforming investments is that these companies have their own wechat mini programs which allows them to receive additional user traffic this helps to increase revenues and profits for the companies while contributing to investment returns for tencent other tencent investments outside the wechat ecosystem also saw significant outperformance in 2020 including c limited snapchat spotify and afterpay in 2020 and 2021 tencent also had a number of its high-profile investments go public including baker kwashow and roblox which all saw high returns from their initial listing prices in 2021 tencent announced two major investments in universal music group and rackerton universal music group or umg is one of the big three record labels and has partnerships with tencent's music subsidiary tencent music entertainment tencent was already a previous shareholder of umg but exercised a call option to acquire an additional 10 percent of the company this brought 10 cents total stake in the company to 20 percent through 10 cent and 10 cent music entertainment meanwhile rakuten is one of the largest ecommerce and internet platform companies in japan 10 cent along with japan post and walmart invested 2.2 billion dollars in the company in march 2021 tencent plans to work with rocker10 in both e-commerce and digital entertainment with this investment expanding 10 cents global investment reach in addition 10 cent has multiple investments with upcoming ipos or that are being acquired to start tencent is an investor in discord a messaging platform that microsoft is in talks to acquire for 10 billion dollars tencent is also an investor in dd the largest ride-hailing and transportation services company in the world didi is planning to go public in 2021 at an estimated valuation of 100 billion dollars making dd one of the world's largest ipos with 10 cents strong background of capital allocation tencent's investments are a major growth opportunity for the company moving on to business services tencent saw strong performance in its communication and productivity software in 2020 especially for wecom tencent meeting and tencent docs wecom is 10 tencent's work communication platform which connects over 400 million users in 2020 tencent strengthened the connections between wechat and wecom increasing wecom's customer base to 5.5 million enterprises tencent also launched tencent meeting in 2020 one of the most used apps for video conferencing with over 100 million total users 10 cents online document tool tencent docs reported over 100 million monthly active users in 2020 increasing more than four times year over year these services are powered by tencent cloud while tencent cloud still trails alibaba in terms of market share tencent cloud is the next largest player in the market with the shift to the cloud being a secular trend over the next decade tencent's strong positioning in this area through its software and infrastructure as the service solutions will serve as a major opportunity for growth next we'll highlight some key takeaways from tencent's 2020 fourth quarter earnings call overall tencent generated 20.5 billion dollars in revenue increasing 26 percent year of year meanwhile non-ifrs profit attributable to equity holders was 5.1 billion dollars increasing 30 percent year-over-year gross operating and net margins all remained relatively consistent year of year and decreased slightly quarter over quarter breaking down these numbers by segment tencent reports their financials in three main business segments one value-added services which includes social networks and online games two online advertising and three fintech and business services beginning with social networks and value-added services tencent social networks made up 21 percent of 10 cents overall revenue increasing 27 year-over-year tencent's main social networks include wechat which has 1.23 billion monthly active users and qq which has 595 million monthly active users other businesses and social networks include tencent video a leading video streaming service with 123 million paid subscriptions increasing 17 year-over-year intensive music a leading music services platform with 881 million mobile monthly active users and 56 million paid subscriptions increasing 40 year-over-year the other value-added service is online games which made up 29 of 10 cents overall revenue increasing 29 year-over-year tencent is the largest domestic developer and publisher of video games with a sixty percent share of the domestic pc games market and the 54 share of the domestic mobile games market on ios in 2020 tencent launched multiple new titles and further developed their gaming technology for new games tencent released valrant on pc for the international markets as well as moonlight blade mobile and cod mobile for the domestic market valrant a multiplayer action game which took over six years to develop was the most successful 2020 released global pc game in the domestic market moonlight blade mobile was the best performing 2020 release mobile mmorpg for the year supported by its proprietary game engine in addition cod mobile was one of the most popular domestic mobile games by daily active users for previous games honor of kings was the top grossing domestic mobile game for the fourth consecutive year and worldwide for the second consecutive year the league of legends world championship finals attracted over 45 million concurrent users marking a record-high viewership for esports league of legends wild rift a mobile version of league further expanded the franchise's user base meanwhile pubg mobile ranked as the most popular mobile game by monthly active users for the second consecutive year and its flagship tournament was the most viewed esports competition among all mobile games in 2020 tencent also partnered with nintendo distributing over a million nintendo switch consoles in the domestic market by collaborating with renowned console games and other ips tencent is bringing its new mobile games to a larger global audience next up digital advertising revenue made up 18 of 10 cents total revenues increasing 22 percent year of year 10 cents advertising revenue growth was driven by wechat moments and its mobile ad network in addition to offering in-game video and music advertising meanwhile tencent's fintech and business services made up 29 of tencent's overall revenue and increased 29 year-over-year within fintech services revenue growth was driven by the increasing use of payments and wealth management services total payment volume facilitated by wechat pay also saw strong growth driven by more daily active consumers and higher payment frequency in areas including retail public services and groceries within business services tencent expanded its customer base through tencent cloud along with software services such as wecom tencent meeting and tencent docs despite 10 cents strong financial performance in 2020 investors are concerned about increasing fintech and market regulation for internet platforms since the fourth quarter of 2020 there have been key regulatory changes in the fintech space for online lending changes include more restrictions on loans capital requirements and leverage ratios online consumer credit and lending services will likely see a decrease in growth moving forward online wealth management and payment services also saw increased scrutiny tencent's online lending business is done through we bank a digital bank that tencent owns a 30 stake in tencent monetizes this business by charging a fee on loans distributed by wechat wallet tencent's management emphasized in their quarterly earnings call that their operations are fully compliant with regulators and that they will work closely with them to make any necessary changes they stated that their focus is on risk management over scale especially in the fintech industry as a result tencent management stated that they are less affected by these regulations due to their cautiousness in addition tencent may have to change its fintech corporate structure which would involve restructuring its assets under a financial holding company in order to meet new requirements this could result in a loss of control over the financial holding company from tencent's perspective in regards to more general market regulation for internet platforms tencent has demonstrated strong regulatory cooperation especially after 2018 with their gaming business that being said tencent could face headwinds regarding their merger deal with huya and doyu two leading game live streaming platforms that tencent holds a controlling stake in their investments are also facing more regulatory attention which could impact tencent's future ability to deploy capital at the speed and scale that they operate at however if tencent can overcome its regulatory hurdles maintain its economic mode and sustain its double-digit top and bottom line growth rates it looks to be a matter of when not if tencent will reach a trillion dollar market valuation with a market cap of about 750 billion dollars as of this upload this would represent over 30 percent upside in 10 cent stock

Channel: Anivestor

Views: 2,330

Rating: 4.8987341 out of 5

Keywords: Tencent, Tencent stock, tcehy, tcehy stock, stock analysis, tencent stock analysis, alibaba vs tencent, alibaba, alibaba stock, Investing, Investment, tencent analysis, How big is tencent, Stock, Business, Company, Technology, Gaming, Growth stock, Esports, Anivestor, how big is Tencent, Tencent stock price, gaming stock, Tencent investment, Tencent games, tencent investments, tencent investment portfolio, investment portfolio, wechat, WeChat ecosystem, WeChat pay, WeChat mini programs

Id: MoASXsnssfE

Length: 12min 1sec (721 seconds)

Published: Mon Mar 29 2021