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Tencent Holdings Limited Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

Simply Wall St

Last week, you might have seen that Tencent Holdings Limited (HKG:700) released its third-quarter result to the market. The early response was not positive, with shares down 2.2% to HK$320 in the past week. It was not a great result overall. While revenues of CN¥97b were in line with analyst predictions, earnings were less than expected, missing estimates by 11% to hit CN¥2.13 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.

View our latest analysis for Tencent Holdings

SEHK:700 Past and Future Earnings, November 16th 2019

Taking into account the latest results, the most recent consensus for Tencent Holdings from 44 analysts is for revenues of CN¥469.1b in 2020, which is a substantial 32% increase on its sales over the past 12 months. Earnings per share are expected to shoot up 24% to CN¥11.24. Yet prior to the latest earnings, analysts had been forecasting revenues of CN¥471.1b and earnings per share (EPS) of CN¥11.30 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at CN¥369. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Tencent Holdings at CN¥415 per share, while the most bearish prices it at CN¥274. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We can infer from the latest estimates that analysts are expecting a continuation of Tencent Holdings's historical trends, as next year's forecast 32% revenue growth is roughly in line with 32% annual revenue growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 19% next year. So although Tencent Holdings is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider market.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Tencent Holdings analysts - going out to 2023, and you can see them free on our platform here.

You can also view our analysis of Tencent Holdings's balance sheet, and whether we think Tencent Holdings is carrying too much debt, for free on our platform here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.