UPDATE: Tencent reported Q2 revenue of 134.03 billion Chinese yuan or $19.78 billion in the second quarter. That represents a drop of 3% year-over-year, and its first-ever year-over-year revenue decline. In Q2 2021, Tencent reported revenue of $21.41 billion. Furthermore, this is a revenue miss, as estimates were 134.6 billion yuan.
Tencent Holdings Ltd. (TCEHY) is in the spotlight due to various reasons. The Chinese gaming giant has missed revenue estimates in every quarter since the first quarter of 2020, and investors are waiting to see whether the company misses revenue estimates this time as well.
Nonetheless, Tencent had an excellent record of outpacing EPS estimates, which was broken in the March quarter this year. Investors are also worried about whether the company will miss earnings estimates this time too.
Is Tencent in Trouble?
The regulations imposed on technology companies in China, especially media and entertainment firms, have been adversely affecting Tencent’s operations in China, causing it to lose billions of dollars. This is expected to have continued in the second quarter.
Heavy fines and other regulatory issues have dented its revenues and margins so much that the company even had to discontinue some of its services, fearing further scrutiny.
How Does Tencent’s Q2 Look?
Alibaba’s (BABA) revenue and earnings beat last week gave investors some hope for Tencent’s Q2. Moreover, the company’s music entertainment arm Tencent Music Entertainment (TME) also released upbeat second-quarter results on Monday, which is a breather.
Hedge Fund Activity Looks Encouraging
Despite the regulatory issues the company has been facing, hedge funds have increased their holdings in TCEHY stock in the second quarter.
According to TipRanks, hedge funds have a very positive stance on the company. Per the tool, hedge funds tracked by TipRanks have added 1.3 million shares of TCEHY in the second quarter.
Is TCEHY a Buy or Sell?
The only rating that Tencent enjoys has a Hold on the company, with a price target of $44, indicating 15% upside potential.
Final Thoughts
Tencent has managed to hold up and navigate pressures from the Chinese regulatory as well as other macroeconomic and social setbacks for the past few quarters. Yet it seems not to have dodged the problems facing other companies in the lackluster Chinese economy.
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