Tencent Share Price: Is China’s Biggest Company a Bargain?

Tencent share price has crawled back this month as the market reacted to the upcoming dividend payouts. The stock jumped to H$280, which was about 41.8% above the lowest level this year. Tencent, which is the biggest company in China by market cap, has dropped by over 63% from its all-time high. Its market value plunged to $347 billion.

Growth slows

Tencent is one of the most important Chinese conglomerates. It operates companies in communications and social, digital content, fintech services, and tools. Some of its top products are WeChat, QQ, Tencent Games, Tencent Sports, WeChat Pay, QQ Wallet, and QQ Browser. Tencent also runs Tencent Ventures, which has invested in companies like Lilium, Atomwise, Oscar, and Guardant.

Tencent share price has been under intense pressure in the past few months because of the ongoing regulatory crackdown in the country. The Chinese government has moved to impose strict regulations on tech companies like Alibaba, Tencent, and Meituan. For example, the government has failed to receive video game licenses. As a result, the Chinese videogame market has plunged by 19% this year.

These regulations, coupled with the ongoing Chinese slowdown, have led to a significant underperformance by both Tencent and its subsidiaries. This month, Tencent said that its total revenues crashed by 2% to $19.7 billion. Its operating profit remained unchanged at $5.8 billion while profit for the period grew by 3% to $4.7 billion. The firm ended the quarter with over $44.5 billion in cash.

Tencent dividend distribution

Tencent share price rallied after the company announced a new giant dividend distribution. The firm will distribute most of its stake worth about $20 billion as a special dividend to shareholders. That distribution will leave its stake at 1.5%. In the past few months, Tencent has also disposed of its stake in companies like JD and Sea Ltd.

So, is Tencent stock price too cheap to ignore? Tencent, like its western peers such as Meta Platforms and Amazon, has transitioned from being a growth to value. It has great assets and an exceptional balance sheet, which means it will likely start rebounding. 

The company is also repurchasing its shares in a bid to reduce its share count. It has spent over $2.3 billion since June.

Tencent share price forecast

The four-hour chart shows that the Tencent stock price has been in a strong bullish trend in the past few weeks. It has managed to move above the 50-day moving average and the Ichimoku cloud. It is slightly below the key resistance level at $287, which was the lowest level on August 2. The stock has also formed a bullish flag pattern.

Therefore, there is a likelihood that the stock will continue rising as buyers target the key resistance level at $335. This was an important resistance level since it was the highest level on August 31. A move below the support at $265 will invalidate the bullish view.

Tencent share price