Goldman Sachs: Raises target price for TENCENT (00700) to 770 Hong Kong dollars, valuation compared to global peers still has a discount.

Goldman Sachs released a research report stating that TENCENT (00700) is empowering all of its business lines with AI, benefiting from its unique WeChat ecosystem and global gaming assets. The firm maintains a "buy" rating on Tencent, with a target price of 770 Hong Kong dollars in the base scenario, which is evaluated using a comprehensive method. The firm's target price for Tencent in the "bull market" scenario is 846 Hong Kong dollars, and in the "bear market" scenario is 541 Hong Kong dollars. Tencent's stock price has risen by 56% since the beginning of the year, compared to 44% for the Hang Seng Tech Index. Despite investors' worries about US tariffs and geopolitical risks escalating again, Goldman Sachs remains positive on Tencent. While the stock's revaluation this year to a forward P/E ratio of 19 times for 2026 is relatively discounted compared to global peers, and it has relatively low monetizable assets, multiple AI-driven monetization levers, and a stable shareholder return policy. The firm expects the market to focus on AI applications and capital expenditure outlook, as well as upgrades to basic AI and multimodal AI model capabilities in Tencent's third-quarter performance. The firm predicts a 13% year-on-year increase in Tencent's third-quarter revenue and an 18% increase in earnings per share, driven by high-margin revenue sources and operational leverage. Goldman Sachs has raised its capital expenditure forecast for Tencent from this year to 2027 to 350 billion yuan, and also raised its cloud revenue growth forecast.