Advertisement
Hong Kong stock market
BusinessChina Business

Tencent set for growth path in fourth quarter on revenue from video monetisation and new online games, Goldman says

  • Efforts to monetise video accounts and the release of a delayed online game will yield revenue and profit growth in the fourth quarter, the investment bank says
  • Citic Securities says Tencent’s earnings may have bottomed out in the third quarter on measures to cut costs and improve efficiency

Reading Time:2 minutes
Why you can trust SCMP
2
Tencent headquarters in the Nanshan district of Shenzhen, Guangdong province, China, pictured on September 2, 2022. Photo: Reuters
Zhang Shidongin Shanghai

Tencent Holdings will probably chart stronger revenue and profit growth from this quarter, as the operator of Chinese social-media tool WeChat ramps up efforts to monetise its video accounts and releases a much-awaited online game, Goldman Sachs said.

The video move may bolster Tencent’s advertising income, making it the biggest contributor to that business segment by 2025, Goldman said in a report on Tuesday. Meanwhile Undawn, an online survival game that missed its scheduled launch in September, is expected to hit the market later this quarter, followed by more games next year, it added.

Tencent’s third-quarter earnings report is due November 16. Tech peers Alibaba Group Holding, Meituan and JD.com are also due to release their quarterly report cards next month.

Tencent is set for revenue growth recovery “with the pace gradually accelerating into 2023,” Goldman analysts led by Ronald Keung wrote in the report. “We expect management to continue to return value to shareholders while rationalising spending.”

Undawn, an open-world survival game developed by Tencent, is slated for release later this quarter. Photo: Handout
Undawn, an open-world survival game developed by Tencent, is slated for release later this quarter. Photo: Handout

The Wall Street investment bank expects Tencent to post a 1 per cent drop in revenue and an 8 per cent decline in operating profit for the third quarter, citing weakness in the group’s gaming, advertising and fintech units. That would extend its earnings woes from the second quarter, when revenue shrank for the first time in at least a decade and profit tumbled 56 per cent.

The impending results may offer investors an opportunity to reassess China’s biggest technology companies, which have suffered from years of regulatory crackdown and pandemic flare-ups. Citic Securities, China’s biggest publicly traded brokerage, this week said Tencent’s earnings may have already bottomed, following measures to cut costs and improve efficiency.
Advertisement