Tencent (SEHK:700) Valuation: Is There More Upside After Recent Share Price Movements?

Tencent Holdings (SEHK:700) shares saw modest movement today, catching the attention of investors assessing the company’s performance over the past month and quarter. With Tencent’s stock pattern showing both lows and rebounds recently, many are curious about its current valuation.

See our latest analysis for Tencent Holdings.

After a strong year-to-date rally, Tencent’s 1-year total shareholder return stands at an impressive 52.11%, with 3-year gains of 177.23% signaling remarkable long-term momentum. While recent dips have caught attention, the overall trend still points toward renewed optimism among investors deciding whether current prices reflect future upside.

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With recent price strength and a history of strong returns, the question arises: is Tencent’s stock still trading below its true value, or have expectations for future growth already been fully reflected in today’s price?

Most Popular Narrative: 22.9% Undervalued

At HK$627 per share, Tencent’s last close is significantly below the narrative’s fair value estimate of HK$813.65. This suggests a notable gap investors are eyeing. With the fair value much higher than the current price, there is growing interest in whether bold assumptions about Tencent’s future are realistic or too optimistic.

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Read the complete narrative.

The key element to this narrative is aggressive forecasts on Tencent’s top-line growth and profitability, which play a prominent role. Want to see what numbers justify such a premium? Decide for yourself what makes this valuation tick.

Result: Fair Value of $813.65 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, potential headwinds, including geopolitical tensions and heightened competition from domestic tech giants, could quickly shift sentiment and challenge these growth assumptions.

Find out about the key risks to this Tencent Holdings narrative.

Another View: The Multiple Tells a Different Story

While the fair value narrative sets a high bar, looking at the price-to-earnings ratio paints a more cautious picture. Tencent trades at 25 times earnings, which is higher than both the Asian industry average (22.7x) and the peer average (24.5x), yet still below the fair ratio of 34.6x. This means investors could be paying a premium today compared to similar companies, even though there is potential for the market to adjust toward the fair ratio. Does this premium signal confidence in future growth or introduce valuation risk if momentum fades?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Tencent Holdings Narrative

Whether you want to challenge these views or dig deeper into your own analysis, you can craft a custom Tencent narrative in just a few minutes: Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Tencent Holdings.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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