Tencent's Third-Quarter Net Profit Likely Rose 25% -- Earnings Preview

Dow Jones
11 Nov 2024

TENCENT is scheduled to report third-quarter results on Wednesday. Here's what you need to know:

NET PROFIT FORECAST: The Chinese videogame and social-media company's quarterly net profit likely jumped 25% to 45.12 billion yuan, equivalent to $6.28 billion, according to the consensus estimate by Visible Alpha. Tencent's adjusted net profit likely reached 53.70 billion yuan.

REVENUE FORECAST: Third-quarter revenue likely rose 8.0% to 167.00 billion yuan, supported by the online gaming and social network businesses. Online gaming revenue growth likely accelerated to 13% from a year earlier, supported by both domestic and overseas markets, Nomura analysts said in a recent note.

Tencent's Hong Kong-listed stock has climbed 40% this year after rising 19% in the third quarter. China's aggressive policy push in late September pushed up share prices across the market. Tencent has also benefited from the robust performance of its blockbuster title "Dungeon & Fighter Mobile."

WHAT TO WATCH:

--Tencent's domestic game revenue was likely supported by strong performance for flagship titles during summer promotions, including "Honor of Kings," "Peacekeeper Elite" and a full quarter's contribution by DnF mobile. "We believe Tencent remains superior in its self-development capabilities and securing top IP for game operations and licensing in future pipeline," Citi analysts said in research note. Investors should focus on the game maker's upcoming launches in the final quarter and early next year.

--Tencent's fintech and business services segment has been pressured amid China's subdued macro environment. Citi reckons a key focus of the earnings briefing will be management's comments on the macro climate, particularly its payment transaction activities and advertisers' sentiment during the Singles Day promotion period.

-- Alibaba started to offer Tencent's payment services on its domestic shopping sites Taobao and Tmall in September. Investors will look for feedback on the collaboration.

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