Morgan Stanley: Tencent is a "safe haven with a catalyst"

Earlier this week, Morgan Stanley released a research report titled "Tencent: A Safe Haven with Catalysts", stating that Tencent is a solid investment choice that can provide a certain level of protection in a volatile market.

Analysts like Gary Yu from Morgan Stanley pointed out in the report that Tencent's gaming business is expected to achieve rapid growth in Q2 this year, becoming a leading indicator of the company's future profits exceeding expectations.

The team noted that Tencent's domestic gaming revenue is expected to grow by 10-15% year-on-year in Q2, a significant acceleration from 3% in the same period last year, while the growth rate of international gaming business is expected to reach 40-50%, compared to 34% in the same period last year. This strong growth momentum is expected to offset the potential impact of the macroeconomy on advertising and payment businesses.

The report specifically mentioned the outstanding performance of several games under Tencent, including "Dungeon & Fighter Mobile" (DnFM) and "Brawl Stars" from Dutch mobile game developer Supercell (partially owned by Tencent).

Since its launch, "Dungeon & Fighter Mobile" has maintained a daily average iOS revenue of 60 million RMB, while "Brawl Stars" saw a 5 to 10 times year-on-year revenue growth in the second quarter of 2024.

Morgan Stanley believes that Tencent's diversified layout in the gaming market and strategic resource allocation will help drive the continuous growth of its gaming business. In addition, Tencent has shown structural advantages in the early monetization cycle of video accounts, market share growth, and sustainability of profit margins.

Based on an estimated P/E ratio of 13 times in 2025, Morgan Stanley has set a target price of 450 Hong Kong dollars for Tencent's Hong Kong-listed shares, representing a 25.6% increase from Friday's closing price.

Analysts believe that Tencent's current stock price is attractive, and the company's over 100 billion Hong Kong dollars share buyback plan provides investors with a good entry point