Tencent Holdings (TCEHY) Gaming Estimates Cut at Morgan Stanley

Morgan Stanley analyst Gary Yu reiterated an Overweight rating on Tencent Holdings (OTC: TCEHY) after the company reported Total Revenues of Rmb134bn (+26% YoY) 2% above consensus, with gross game revenue of Rmb47bn (+29% YoY) and international game revenue of Rmb9.8bn (+43% YoY). Non-IFRS OP of Rmb38bn (+26% YoY) was 3% below consensus on higher SG&A expenses.

The analyst maintained the HK$820.00 price target but cut 2021e mobile game revenue by 2% and FinTech revenue by 1% to reflect a more prudent outlook in light of post-COVID normalization and regulatory risks. The analyst stated "Game billings declined QoQ in 4Q20 due to post-Covid normalization and seasonality, following lack of new game launch in 1Q21. We now forecast mobile game revenue to grow 18% YoY in 1Q21 and 20% YoY in 2021. We also expect Tencent will continue to invest in SG&A for future growth, which could lead to margin pressure in 2021. Game pipeline to monitor includes DnF Mobile and LoL Wild Rift, but we cite limited visibility on exact launch time."

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 $76.81 yesterday.

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