HSBC raised Tencent target prices, kept Buy rating

 

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HSBC Global Research raised the forecast of Tencent’s 2022-2024 adjusted net profit by 8% – 9%, and hiked the target price for the stock from $475 to $495 with rating maintained unchanged at Buy.

Tencent delivered second-quarter results that beat market expectations and the company is expected to achieve earning growth in the third quarter of 2022 through cost cutting and advertisement upside, HSBC Global Research said in a note.

Although Tencent management dismissed the reported sale of Meituan stake, it noted that capital return through buybacks and dividends remains the focus, the bank said.

Tencent has adequate resources to fund buybacks and dividends, said the broker. Prosus and Naspers’ reduction in Tencent stake may remain as a negative, but Tencent may resume buyback after earnings results to offset the impact since the management considered the stock was undervalued, according to the note.