"Big Banks" Bank of America Securities raises Tencent's target price to 780 yuan as AI monetization momentum strengthens

AASTOCKS
2025.10.21 03:44

Bank of America Securities' research report points out that Tencent (00700.HK) has the best investment portfolio in China's internet industry, including AI-driven growth potential, a stable competitive landscape, and shareholder returns under attractive valuations. In the AI field, the bank views Tencent as a major beneficiary of AI applications and monetization in China, with its advertising and cloud revenue likely to accelerate growth, validating the benefits of AI technology to its core business.

The bank also believes that the continuous integration of AI features into WeChat (for example, through AI agents directly recommending services and products within WeChat) is expected to drive a re-rating of the stock price in the medium term; it reaffirms Tencent's "Buy" rating and raises the target price from HKD 690 to HKD 780, changing its valuation forecast from discounted cash flow to a comprehensive approach, equivalent to adjusted price-to-earnings ratios of 23 times and 20.6 times for 2026 and 2027, respectively.

Bank of America Securities expects Tencent to achieve a 13% year-on-year revenue growth, with adjusted operating profit growing 18% year-on-year. By business segment, it is expected that in the third quarter of fiscal year 2025, even with a higher base, the gaming business can still grow by 18% year-on-year. Advertising revenue is expected to grow by 20% year-on-year; given the ongoing investment in AI infrastructure, cloud revenue growth may accelerate, while fintech will continue to recover; it is expected that fintech and enterprise service revenue will grow by 11% year-on-year. In terms of profitability, it is expected that recent profit margins will remain stable, although future depreciation expenses may increase.

Bank of America Securities has lowered its earnings forecast for Tencent for 2026 to 2028 by 0.1% to 2% to reflect faster advertising, cloud, and fintech revenue offsetting higher depreciation and other factors

Source: AASTOCKS The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.