Tencent Holdings has added over US$150 billion in market value in 2024, but its share price remains 26% below its all-time high.

The Hong Kong-listed tech giant trades at a lower price-to-earnings ratio than peers like Meta and Sony, both around 22 times, and Nintendo, which is nearly 40 times, all of which recently hit record share prices.

Tencent’s shares are at 17.6 times estimated forward earnings, compared to its five-year average of 20 times.

Analyst estimates for Tencent’s 12-month forward earnings per share have reached a record high, and its upcoming earnings report is expected to show an 11% rise in revenue for the quarter ended June.

Goldman Sachs expects the launch of Valorant Mobile to boost Tencent’s revenue from later this year through mid-2026, while analyst Ronald Keung notes Delta Force is emerging as a potential long-term franchise.

June Lui of Polen Capital says Tencent’s diversified business, including WeChat and ads, makes it more resilient to economic headwinds than some other Chinese internet firms.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Regulatory setbacks created lasting valuation scars despite strong fundamentals recovery

Tencent’s current 26% discount to its all-time high reflects the enduring impact of China’s 2021-2022 corporate crackdowns on investor sentiment.

The company’s valuation peaked near $1 trillion in January 2021 before regulatory pressures drove it to five-year lows in 20221. Even with strong operational recovery, including 82% profit growth in Q2 and three consecutive quarters of double-digit revenue growth2, the stock trades at just 17.6 times forward earnings compared to its five-year average of 20 times.

This persistent discount demonstrates how regulatory risk can create lasting valuation gaps even when business fundamentals fully recover. The trend is consistent with other Chinese tech giants that experienced similar regulatory scrutiny, where investor confidence rebuilds more slowly than actual business performance.

2️⃣ AI efficiency breakthroughs position Tencent differently in competitive landscape

Tencent’s approach to AI development emphasizes practical efficiency over raw computing power, potentially giving it advantages in cost-effective deployment across its platforms.

The company’s Hunyuan-A13B model uses 80 billion parameters but activates only 13 billion during inference, delivering 2.2-2.5 times better efficiency than larger competing models3. This technical approach contrasts with competitors focused purely on model size and computational power.

Additionally, Tencent’s newer Hunyuan T1 model operates twice as fast as similar competing models while matching the capabilities of DeepSeek’s R1 and OpenAI’s o14. This efficiency focus could prove crucial for integrating AI across Tencent’s gaming and social platforms at scale, where processing costs directly impact margins.

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