TCEHY - Tencent: A Capital Return Play For 2024 And Beyond

2024-07-06 10:09:37 ET

Summary

• Tencent's Q1 showed promise with continual momentum in the online ads business.
• Tencent's strong gross profit growth and high free cash flow margins make it potentially attractive as a capital return play.
• The company's low valuation, with a P/E ratio of less than 14X, presents an opportunity for investors.

Shares of Tencent Holdings Limited ( TCEHY ) keep trading at an undeservedly low price-to-earnings ratio despite the Chinese technology company reporting decent Q1'24 results. Tencent represents good value, in my opinion, because the communications firm is growing, especially in online advertising. The company's focus on controlling costs is paying off in the form of surging gross profits and Tencent continues to generate a ton of free cash flow. In my opinion, an investment in Tencent reflects a high safety margin and U.S investors are too hesitant to buy into promising Chinese large-cap!...

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