Xiaomo: Lowering the target price of Tencent Holdings (00700) to HK$625 to maintain the “Overweight” rating

The Zhitong Finance App learned that J.P. Morgan Chase released a research report stating that it maintained the “gain” rating of Tencent Holdings (00700), lowered the target price from HK$690 to HK$625, and lowered the 2026 and 2027 non-IFRS earnings forecasts per share by 2% and 10%, respectively, mainly due to increased AI depreciation and related costs. The bank pointed out that Tencent Holdings' artificial intelligence strategy now has a clear order, but returns will take longer.

The bank said that Tencent first built a competitive self-developed model at a rapid release pace, then earned returns from enterprise productivity tools and cloud services, and only expanded the smart device on WeChat on a national scale when quality and cost permitted. The bank believes that this order will give full play to Tencent's advantage, but it will put the costs ahead. Xiaomo said he will hold Tencent because it has a high-quality core business that can carry artificial intelligence construction, its valuation is low, and the potential of the WeChat smart device exceeds the bank's predictions.