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華爾街日報Is It Too Late To Consider Tencent After Its 2025 Rally And Valuation Upside?
- If you are wondering whether Tencent Holdings is still attractive after its big run, or if you are arriving too late to benefit, this breakdown will help you consider whether the current price reflects the company’s long term potential.
- The stock has cooled off slightly in the short term, down 1.0% over the last week and 6.9% over the past month. It is still up 43.4% year to date and 49.5% over the past year, with a 108.0% gain over three years.
- These moves sit against a backdrop of continuing global gaming reach, steady expansion of its fintech and business services arm, and ongoing efforts to streamline its investment portfolio to focus on higher conviction positions. At the same time, markets are watching how Tencent responds to evolving Chinese tech regulation and competition in social media, gaming, and cloud, which all influence how investors are recalibrating risk and reward.
- On our numbers, Tencent scores a 5/6 valuation check, suggesting it appears undervalued on most of the key metrics we track. Next, we will walk through those different valuation approaches, before finishing with a more holistic way to think about what the stock might be worth.
Approach 1: Tencent Holdings Discounted Cash Flow (DCF) Analysis
The Discounted Cash Flow model estimates what Tencent is worth today by projecting the cash it can generate in the future and discounting those amounts back to a present value. In Tencent’s case, we use a two stage Free Cash Flow to Equity model that starts with current cash generation, then applies higher growth in the near term before slowing in later years.
Tencent generated trailing twelve month free cash flow of roughly CN¥201.2 billion. Based on analyst forecasts and Simply Wall St’s longer term extrapolations, free cash flow is projected to rise to about CN¥403.7 billion by 2029, with further growth taking it above CN¥590 billion by 2035. Those future cash flows are discounted back to today to reflect risk and the time value of money.
On this basis, the DCF model arrives at an intrinsic value of around HK$887.41 per share. Compared with the current market price, this implies Tencent is trading at about a 32.8% discount to its estimated fair value, indicating that the shares may currently be undervalued if the cash flow trajectory is delivered.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Tencent Holdings is undervalued by 32.8%. Track this in your watchlist or portfolio, or discover 906 more undervalued stocks based on cash flows.
Approach 2: Tencent Holdings Price vs Earnings
For profitable, established businesses like Tencent, the price to earnings ratio is a useful shorthand for how much investors are willing to pay today for each unit of current earnings. It naturally captures both the market’s expectations for future growth and the perceived risks around those earnings.
In general, faster growing and less risky companies tend to justify a higher PE ratio, while slower growth or higher uncertainty point to a lower, more conservative multiple. Tencent currently trades on a PE of about 22.4x, slightly above the Interactive Media and Services industry average of around 20.9x, but well below the broader peer group average of roughly 59.2x.
Simply Wall St’s Fair Ratio framework goes a step further by estimating what Tencent’s PE should be, given its earnings growth outlook, profitability, industry positioning, market cap and risk profile. This produces a Fair Ratio of about 29.8x, which is more tailored than a simple comparison with peers or the sector, as it adjusts for Tencent’s specific strengths and risk factors. With the current 22.4x multiple sitting meaningfully below the 29.8x Fair Ratio, the stock still screens as attractively valued on earnings.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Tencent Holdings Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you attach a clear story and set of assumptions about Tencent’s future revenue, earnings and margins to a financial forecast and a resulting fair value estimate. Instead of only relying on static ratios, a Narrative links what you believe about Tencent’s products, competitive position, regulation and catalysts to explicit numbers. This lets you see how your view translates into cash flows and a fair value that you can compare with today’s share price to decide whether to buy, hold or sell. Narratives are available on the Simply Wall St Community page, where millions of investors can create and share their own scenarios. They update dynamically as fresh news, earnings releases or regulatory shifts come through, so your thesis evolves with the facts rather than going stale. For example, some Tencent Narratives on the platform currently point to fair value near HK$814 per share, while more cautious views are closer to HK$508, reflecting how different, but clearly stated, expectations can lead to very different conclusions about upside or downside.
For Tencent Holdings however we will make it really easy for you with previews of two leading Tencent Holdings Narratives:
Fair value: HK$813.65 per share
Implied undervaluation vs last close (HK$596.50): approximately 26.7%
Assumed revenue growth: 15%
- Expects AI, Weixin ecosystem upgrades, and higher value engagement in video, mini games and search to drive high margin growth across Tencent’s existing user base.
- Builds in expanding global fintech, SaaS and cloud solutions, including new WeBank Technology Services in Hong Kong, to support a 15% revenue CAGR with solid but slightly lower profit margins.
- Acknowledges geopolitical and regulatory risks, but assumes they are manageable with a 9% discount rate and that competition, while intense, does not derail long term earnings power.
Fair value: HK$508.40 per share
Implied overvaluation vs last close (HK$596.50): approximately 17.4%
Assumed revenue growth: 12%
- Recognises strong long term growth drivers in cloud, gaming, fintech and the metaverse, but assumes these opportunities are partly offset by regulatory, competitive and execution risks.
- Emphasises heavy dependence on gaming revenue, potential market saturation in China and the high cost and uncertainty of cutting edge bets like AI and immersive virtual worlds.
- Builds in tighter margins and a more conservative 12% revenue growth path, resulting in fair value below the current price and implying the stock already prices in a lot of the good news.
Both narratives use the same underlying framework but arrive at very different fair values, which is exactly the point. They make your assumptions about growth, margins, risk and regulation explicit so you can decide which story, or blend of stories, best matches how you see Tencent today.
Do you think there's more to the story for Tencent Holdings? Head over to our Community to see what others are saying!
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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