Article / 06 November 2015 at 11:00 GMT

Earnings Watch: Can Tencent live up to high expectations?

Head of Equity Strategy / Saxo Bank
  • Tencent earnings to spotlight games, advertising
  • Analysts expecting Tencent to post sales growth of 28%
  • Chinese firm's valuation high but not stratospheric 


Poised for growth: Tencent's headquarters in Shenzhen. Photo: Wikimedia Commons

By Peter Garnry

The earnings season is in its final stage and next week 118 companies will report third-quarter earnings. The week's releases are slated to include several emerging market companies –particularly Brazilian companies – that could prove important for the MSCI Emerging Markets Index, but today we will focus our attention on Tencent – Alibaba's biggest competitor in the rapidly growing Chinese e-commerce market.

Ads, games and O2O boost growth

Tencent reports its Q3 earnings on Tuesday with analysts expecting earnings per share of RMB 0.87 (up 25% year-over-year) and sales of RMB 25,425 (up 28% y/y).

These high expansion targets are driven by strong growth in ads on its various platforms and, lately, performance-based ads on WeChat. Tencent has also been expanding into video content ads of late, and the firm is growing its O2O business (online-to-offline) and supporting it with capital to compete against Baidu. 

Lastly, Tencent is still big in mobile games which represents the company's largest segment, accounting for 57% of total revenue.

Tencent's valuation is still on the high side with trailing EV/EBITDA at 31x compared with Facebook's 44x, but Facebook is also growing faster and has higher margin potential. 

Compared to Alibaba, which is also valued at 44x on trailing EV/EBITDA, Tencent is more attractive for investors.

Tencent weekly share price since 2010:
Tencent share price

Create your own charts with SaxoTraderGO click here to learn more

Source: Saxo Bank 

The most important earnings releases next week are...

Monday: Continental, Bridgestone, Priceline

Tuesday: Pandora, Vivendi, Vodafone, National Grid

Wednesday: Henkel, Deutsche Post, E.ON, Carlsberg, UniCredit,

Thursday: Petrobras, Banco do Brasil, Manulife, Siemens, Merck KGaA, SABMiller, Enel, Cisco Systems

Friday: Mitsubishi UFJ, Sumitomo Mitsui, Mizuho Financial

Find earnings and revenue estimates on next week's earnings releases in the attached PDF.

— Edited by Michael McKenna

Peter Garnry is head of equity strategy at Saxo Bank

Download document

Earnings Watch - 2015-11-09


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail