Tencent Holdings Limited : One could take advantage of the market's hesitation

08/11/2020 | 01:48am EST

David Meurisse

long trade Target price hit

Entry price : 502HKD | Target : 577HKD | Stop-loss : 479HKD | Potential : 14.94%

Shares in Tencent Holdings Limited are retreating towards the lower bound of a horizontal trading range. Investors could use the proximity of this support area to initiate new long positions. Investors have an opportunity to buy the stock and target the HKD 577.

Summary

• The company has strong fundamentals. More than 70% of listed companies have a lower mix of growth, profitability, debt and visibility criteria.
• In a short-term perspective, the company has interesting fundamentals.

Strengths

• Analysts expect a sharply increasing business volume for the group, with high growth rates in the coming years.
• Margins returned by the company are among the highest on the stock exchange list. Its core activity clears big profits.
• Thanks to a sound financial situation, the firm has significant leeway for investment.
• Analysts have consistently raised their revenue expectations for the company, which provides good prospects for the current and next years in terms of revenue growth.
• Analysts remain confident with respect to the group's activity and, more often than not, have revised upwards their earnings per share estimates.
• Analysts have a positive opinion on this stock. Average consensus recommends overweighting or purchasing the stock.
• The tendency within the weekly time frame is positive above the technical support level at 410.4 HKD

Weaknesses

• Stock prices approach a strong long-term resistance in weekly data at HKD 546.5.
• Technically, the stock approaches a strong medium-term resistance at HKD 564.
• Based on current prices, the company has particularly high valuation levels.
• With a 2020 P/E ratio at 44.35 times the estimated earnings, the company operates at rather significant levels of earnings multiples.
• The company is not the most generous with respect to shareholders' compensation.

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