Summit Research Upgrades Tencent Holdings (TCEHY) to Buy

Summit Research upgraded Tencent Holdings (OTC: TCEHY) from Hold to Buy with a price target of HK$170.

Analyst Henry Guo commented, "We are upgrading Tencent shares from HOLD to BUY after recent selloff, given: firstly, economy concern is overblown, as we believe Tencent's core gaming and social network business is comparatively less affected by economy downturns; secondly, we believe street expectations on 2016 WeChat Moments advertising revenue may prove conservative, and WeChat advertising's strong earnings power should help drive upside to consensus on profitability in 2016 and 2017; thirdly, the ecosystem around its Mobile QQ and WeChat well positions Tencent in the space, and we believe Tencent is steps ahead of its leading competitors Alibaba Group and Baidu in building mobile foundations; fourthly, LINE's potential dual listing in Tokyo and New York near term may serve as a positive catalyst to Tencent shares, and lastly, the recent weakness creates a compelling risk/reward profile for Tencent shares. Trading at HK$143.4 (25x P/E our 2016e), we continue to see upside. We estimate WeChat valuation range of $70B-$80B, implying valuation per MAU of $110-$130, compared to Twitter's $60 and Facebook $175. We are upgrading Tencent shares from HOLD to BUY with PT of HK$170, which translates into a market cap of roughly $200B for Tencent."

For an analyst ratings summary and ratings history on Tencent Holdings click here. For more ratings news on Tencent Holdings click here.

Shares of Tencent Holdings closed at $18.55 yesterday.

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