JPMorgan: Tencent Remains the Highest-Quality Compound Growth Stock in China’s Internet Sector, Reiterates "Overweight" Rating

Odaily reported that JPMorgan released a report reiterating an "Overweight" rating on Tencent Holdings (00700.HK) with a target price of HKD 690. The bank believes that Tencent remains the highest-quality compound growth stock in China’s internet sector, boasting sustained user engagement, improving monetization capabilities in gaming and advertising, robust profit margins and balance sheet strength, as well as AI optionality with tangible monetization pathways.

The report noted that as Tencent ramps up AI investments and expects depreciation to begin in the second half of this year, the bank has lowered its forecast for Tencent's Non-IFRS earnings per share for fiscal year 2026 by 5% to RMB 28.47, while raising its capital expenditure forecast for 2026 to RMB 200 billion.

However, the bank emphasized that these adjustments reflect heavier AI investment and depreciation rather than any deterioration in Tencent’s core business. The bank expects second-quarter revenue to grow approximately 9% year-over-year, with value-added services revenue increasing by 5% to 6%, gaming revenue up 9% to 10%, marketing services revenue rising 18% to 19%, and fintech revenue growing around 5%, largely in line with market expectations. (Jin10)