JPMorgan: Tencent remains the highest quality compound growth stock in China's internet, reiterates "overweight" rating

Odaily reported that JPMorgan released a report reiterating its "overweight" rating on Tencent Holdings (00700.HK) with a target price maintained at HKD 690. The bank believes that Tencent remains the highest quality compound growth stock in China's internet, possessing sustained user engagement, continuously improving game and advertising monetization capabilities, strong profit margins and balance sheet strength, as well as AI options with clear monetization paths.

The report pointed out that as Tencent increases AI investment and expects to generate depreciation starting from 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, and raised its capital expenditure forecast for 2026 to RMB 200 billion.

However, the bank emphasized that the above adjustments reflect heavier AI investment and depreciation, rather than a deterioration of Tencent's existing core business. The bank expects second-quarter revenue to increase by approximately 9% year-over-year, with value-added services revenue growing by 5% to 6%, game revenue growing by 9% to 10%, marketing services revenue growing by 18% to 19%, and fintech revenue growing by approximately 5%, which is basically in line with market expectations. (Jin Shi)