Tencent Holdings (TCEHY – Free Report) is the giant Chinese Internet portal which provides mobile, telecom, entertainment, social media, and financial services to the largest middle class on the planet — and monetizes most of these services with online advertising.
The stock first slipped to a Zacks #5 Rank on August 20, when it was trading above $44 per share, because analysts took EPS estimates down for this year and next as trouble in China’s economy begins to surface. Since then, shares have slid 25%.
Before I give you the details about the decline in Tencent growth, let’s set the context about the power of Internet companies in the brave new world of the World Wide Web.
In mid-September, a new S&P 500 Communication Services sector replaced the Telecoms sector, absorbing some of the biggest stocks from other sectors like Technology and Consumer Discretionary, with the big targets being Alphabet (GOOGL – Free Report), Facebook (FB – Free Report), Disney (DIS, and Netflix (NFLX – Free Report).
This “re-balance” of the structure among Tech/Media titans came at an interesting time as market volatility exploded this month and investors found themselves running from many of these market leaders.
As the stock market architects at S&P grapple with the “4th industrial revolution” we now so glibly take for granted and just call “the web” — and its machine learning tentacles — here’s how one of those designers of the sector re-hab described the move…
“The lines among media, communications, and content are blurred,” David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said. “It is time to acknowledge this convergence and the overlapping services these companies provide.”
Investing in the Web/Media Titans of China = No Brainer?
I last wrote a Bear of the Day article about Tencent on September 13 to highlight the continued drop in growth estimates since their late August quarterly report. Since the company’s slight miss and subdued outlook, analysts took down both revenue and EPS targets in September.
