Tencent's Stock Price Just Keeps on Tumbling

(Bloomberg) -- Tencent Holdings Ltd.'s stock price keeps tumbling further away from analysts' price targets.

Concern about earnings and a global selloff in tech stocks have dragged Tencent's shares down 7.5 percent this week alone. The Chinese Internet giant closed at HK$345 in Hong Kong on Thursday, the lowest in 10 months. The average price target of 51 analysts is HK$511.62. That's almost 50 percent above current levels, even after several cut their forecasts last month.

Tencent soared every year bar two since its Hong Kong debut 14 years ago. The stock climbed 114 percent in 2017 and then reached a record high this January. The sheen has rapidly fallen off since then, with the Shenzhen-based company losing almost $160 billion of market value. In addition to concern over the tech sector in general, Tencent has been vulnerable to market selloffs in Hong Kong as investors reduced exposure in the most widely-held, liquid names. Concerns have also mounted about its shrinking margins.

JPMorgan Chase & Co., which this week trimmed its price target by 4 percent to HK$480, said Tencent may see weakness in gaming revenue in the near term. The outlook next year may improve post second-quarter results as Tencent is likely to see full-year monetization of its PUBG and Fortnite games, JPMorgan said in a note.

Tencent reports earnings on Aug. 15, and analysts are expecting second-quarter income to grow at the weakest pace since 2012. At least 11 cut their price targets in July, including Credit Suisse Group AG and Morgan Stanley. Still, all 51 forecasters tracked by Bloomberg have maintained the equivalent of a buy recommendation on Tencent shares.

--With assistance from Sarah McDonald.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editors responsible for this story: Will Davies at wdavies13@bloomberg.net, Kana Nishizawa

©2018 Bloomberg L.P.