Tencent stock forecast: strong profits, but major concerns

The Tencent stock forecast is mixed, with pressure coming in from Beijing

There’s a big cloud over the Tencent stock forecast right now as China embarks on a clampdown on its biggest tech companies.

While Beijing knows that this sector is crucial to ensuring that the country is competitive on a global stage, tensions have emerged between technology companies and the ruling Chinese Communist Party. We saw a dramatic example of this when Jack Ma, the charismatic founder of Alibaba, disappeared from public view for more than three months.

Some analysts believe that the current drama holds more weight over Tencent stock predictions than others. Although the brand isn’t particularly well known in the West, it’s a crucial part of life in China. Its WeChat platform, which is not too dissimilar to WhatsApp, has racked up more than one billion users. This ‘superapp’ delivers far more than the ability to message your friends: it also serves as a news source, a payments platform and a food delivery service.

Tencent stock projections also reflect the fact that this company invests aggressively, and now has its fingers in many pies. It has a stake in everything from Tesla to Fortnite, not to mention world-leading music labels and the streaming service Spotify. Figures suggest that Tencent invested more than $12bn (£8.5bn, €10bn) in at least 160 start-ups last year – and overall, its portfolio is heavily skewed towards gaming and entertainment.

Pressure on the Tencent share price forecast isn’t coming from China, either. Donald Trump pursued plans to get WeChat banned during his final few months in office – and although those threats have subsided, the Securities and Exchange Commission has been clamping down on Chinese companies that are publicly listed in the US. (Some of Tencent’s subsidiaries, including Tencent Music, appear on the New York Stock Exchange.)

In this article, we’re going to examine the Tencent stock forecast for 2021, delve into the company’s most recent financial results, and look at the challenges and opportunities that lie ahead for this Chinese conglomerate in the rest of 2021.

What’s happening with Tencent’s stock price?

Tencent’s share price may have made some gains in 2020, but they haven’t really extended into 2021.

Since April 2020, the company’s stock in New York has slumped somewhat, to $588.50 in Hong Kong dollars (HK$) on 21 May. Considering that the price stood at HK$654 on 1 April, that’s a loss of 10% in less than two months.

Tencent recently released its latest tranche of results, covering the first quarter of 2021. Total revenue came in at $20.6bn for the first three months of the year – that’s up 25% compared with the year before. This resulted in a profit of $6.5bn over the period, an increase of 20% year-on-year.

Unfortunately, these robust figures coincided with a fall in Tencent’s share price, seeing it go down from HK$608.50 at close of play on 20 May to HK$599.50 at the start of 21 May. 

Tencent stock: buy or sell?

The fall in Tencent’s stock price has been severe to say the least. At times, tens of billions of dollars have been wiped from the company’s value. There are concerns that Tencent might be forced to spin off its financial services into a separate holding company, which would be bad news for the Tencent stock forecast.

Let’s finish up by taking a look at the Tencent stock forecast for 2021, which is based on its value in US dollars. At present, the median forecast suggests that there will be a 25.63% rise to $96.99 from the current level of $77.20. Meanwhile, the high-end projection anticipates there will be a 56.67% rise to $120.95. Last but not least, the low-end Tencent stock forecast – which could become a reality if concerns over China’s clampdown are realised in full – stands at $65.39, a fall of 15.28%.

Regulatory issues notwithstanding, Tencent’s robust financials means that the stock remains an overwhelming favourite when it comes to analyst recommendations, with 41 buy ratings currently in place. Six others say it will outperform the market, while four others currently have a hold rating.

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  • Is Tencent a good investment?

Possibly. While the Tencent share price has been hit recently, a lot of analysts are predicting it will bounce back. How long that will take remains subject to conjecture and, if you are going to invest, you should do your own research and never put in more money than you can afford to lose.

  • Is Tencent overvalued?

Probably not, if the analysts are to be believed. Out of the analysts who CNN use, no one is saying it will underperform, let alone recommend selling. However, things change all the time, so use appropriate caution. This might suggest that the Tencent stock price isn’t too high. 

  • How to buy Tencent stock

Trade Tencent shares today in tokenised assets at Currency.com. Tokenised assets are crypto derivatives whose value is linked to the value of a particular asset. Currency.com offers the opportunity to buy with leverage, and you can easily define stops and limits to request positions to close at a specified price. 

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