Tencent Holdings (TCEHY) plans to further its ambitions for the metaverse. Citing people with knowledge of the matter, Bloomberg reports that the company is closing in on a deal to acquire Chinese gaming handset maker Black Shark. TCEHY shares rose 1.73% to close at $58.14 on January 10.
Tencent is an investment company that offers online advertising services and other value-added services. Tencent’s earnings report for Q4 2021 is scheduled for March 23, 2022. Tencent’s dividends have increased steadily over the past three years, and it offers a dividend yield of 0.32%.
Black Shark Acquisition
Tencent has already held preliminary talks with Black Shark, which boasts Xiaomi Corp. as one of its investors. The Chinese investment company does not want to be left behind as the development of the metaverse heats up.
Bloomberg reports that Tencent intends to pivot Black Shark into a virtual reality headsets company. Designing specialized hardware for powering virtual reality is one of the pillars of realizing the metaverse. Facebook owner Meta Platforms (FB) has already made significant progress following its earlier acquisition of VR headset maker Oculus in 2014.
Little-known Black Shark will be a great addition as it has made a name for itself in selling stylized phones and other accessories such as controllers. In the past, it partnered with Tencent to develop a gaming phone.
Stock Rating
Consensus among analysts is a Moderate Buy based on 1 Buy.
In November, Barclays analyst Jiong Shao reiterated a Buy rating on the stock with a $79 price target, implying 35.88% upside potential to current levels. The analyst remains bullish about China’s technology sector, in which Tencent has grown to become one of the most influential internet heavyweights.
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