BofA Securities: Reaffirms "Buy" rating on TENCENT (00700) with a target price of 780 Hong Kong dollars.

Bank of America Securities released a research report stating that it reiterated a "buy" rating on TENCENT (00700) and lowered the non-IFRS net profit forecast for 2026 and 2027 by 4% and 3%, respectively, considering the rise in Tencent's AI investment. The target price of 780 Hong Kong dollars is maintained. The report states that Tencent's fourth-quarter performance is expected to reduce the risk of full-year profit forecast and it is expected to have a clear path to valuation revaluation, including the launch of Mix 3.0 and more large language model upgrades within the next 6 months, acceleration of capital expenditure and cloud revenue within the next 6 to 12 months, and the launch of WeChat Smart Body within the next 9 to 18 months. The bank mentioned that Tencent management disclosed that AI-related investments in 2026 will exceed RMB 36 billion, compared to RMB 18 billion in 2025. Increased AI investments may put pressure on the non-GAAP operating profit margin by a low unit number in 2026, but the impact is manageable.