Technology

Tencent’s expected jump in quarterly revenue could be overshadowed by pending WeChat ban

The Tencent Holdings Ltd. WeChat app is displayed in the App Store on a smartphone in an arranged photograph taken in Arlington, Virginia, on Friday, Aug. 7, 2020.

Andrew Harrer | Bloomberg | Getty Images

Tencent reports results for the three months to-June on Wednesday and analysts are expecting one of the fastest revenue-growing quarters in over a year. 

Still, the earnings report will be overshadowed by an executive order signed by President Donald Trump last week that prohibits any transaction related to WeChat, the wildly popular messaging app owned by Tencent. The executive order comes into effect in September. 

Here’s how the company is expected to do based on Refinitiv consensus estimates from analysts:

  • Revenue: 112.72 billion yuan ($16.21 billion). That would be a 26.9% year-on-year rise, the fastest growth since the fourth quarter of 2018.
  • Profit attributable to equity holders of the company: 27.56 billion yuan. 

Gaming boost

Analysts at China Merchants Securities expect Tencent to pull in 41.6 billion yuan in online game revenue. 

Tencent’s gaming division got a boost in the first quarter as people turned to its mobile titles while stuck at home during coronavirus lockdowns in China and elsewhere. Tencent warned then that it expected in-game consumption to normalize going forward. 

Meanwhile, investors are also expecting slowing advertising growth from the company. 

WeChat ban looms

Last week, Trump issued an executive order banning U.S. transactions related to WeChat. The scope of that ruling is unclear as of now.

Investors will be hoping that Tencent’s management addresses some of these concerns. 

However, analysts don’t think Washington’s move will have a major impact on Tencent.

“WeChat itself has immaterial business and financial exposure to the US,” analysts at China Renaissance said in a recent note. 

“We estimate Tencent’s current revenue exposure to the US is less than 3%, with earnings exposure less than 5%,” the analysts said. 

View Article Origin Here

Related Articles

Back to top button