Tencent Holdings shares 700,
The stock fell as much as 3.9% on Thursday and was recently 1.1% lower at 339.00 Hong Kong dollars.
The Chinese tech giant on Wednesday said its first-quarter net profit rose 10% to 25.84 billion yuan ($3.69 billion). That compared with an expectation of CNY29.93 billion, according to a FactSet poll of analysts.
Analysts said the disappointment was partly due to slower-than-expected advertising income growth and a sharp increase in tax expenses.
Still, stronger-than-expected games business and financial services operations helped analysts shrug off the miss.
“We view [first-quarter] result as stronger than expected, especially on the healthy recovery of domestic gaming revenue growth and fintech & business services revenue improvement,” Citi analysts said in a note.
They were particularly optimistic about Tencent’s core gaming business. The segment’s revenue came in 11% above Citi’s estimates.
“More encouragingly, Tencent highlighted robust grossing improvement for franchise titles and newly launched games, which bode well for gaming revenue to resume more healthy and sustainable growth in coming quarters,” the Citi analysts said. “Together with a rich pipeline and a number of strong titles to be released in the coming summer, we believe Tencent’s gaming revenue should be growing from strength to strength in 2023 and into 2024.”
Citi raised its target price on Tencent to HK$506 from HK$503 and kept a buy rating.
