Tencent Holdings ( TCEHY Quick Quote TCEHY - Free Report) reported fourth-quarter 2020 non-GAAP earnings of 52 cents per share that beat the Zacks Consensus Estimate by 4%. Also, revenues of $20.1 billion beat the consensus mark by 3.4%. In local currency, non-IFRS (formerly referred to as non-GAAP) earnings were RMB3.4 per share. Revenues of RMB133.7 billion increased 26.4% from the year-ago quarter, driven by steady performance of FinTech services, smart phone games, as well as social and other advertising verticals. Top-Line Details
Value Added Services (“VAS”) revenues (50.1% of total revenues) rose 28% year over year to RMB67 billion.
Online games revenues grew 29% year over year to RMB39.1 billion, among which international games revenues were RMB9.8 billion, up 43% on a year-on-year basis. The increase primarily reflected revenue contributions from smart phone games including Peacekeeper Elite, Honour of Kings, PUBG Mobile and recently launched titles such as Moonlight Blade Mobile. Total smart phone games revenues (including smartphone games revenues attributable to social networks business) were RMB36.7 billion and PC client games revenues were RMB10.2 billion for the fourth quarter of 2020. Social networks revenues increased 27% year over year to RMB27.9 billion. The increase was mainly driven by revenue growth from digital content services including the consolidation impact of HUYA’s live broadcast services, music and video subscription services, as well as from in-game virtual item sales. Operating Details
Gross profit was up 27.7% year over year to RMB58.9 billion. Gross margin expanded 50 basis points (bps) on a year-over-year basis to 44%.
Selling and marketing expenses increased 49.5% year over year to RMB10 billion. General and administrative expenses increased 23.6% year over year to RMB19.8 billion. Adjusted EBITDA increased 20.6% year over year to RMB46.5 billion. Adjusted EBITDA margin contracted 170 bps on a year-over-year basis to 34.8%. Non-GAAP operating profit grew 25.7% year over year to RMB38.1 billion. Operating margin contracted 20 bps year over year to 28.5%. Balance Sheet & Cash Flow
As of Dec 31, 2020, cash and cash equivalents of the company were RMB152.7 billion compared with RMB152.4 billion on Sep 30, 2020.
As of Dec 31, 2020, net cash was RMB11.02 billion compared with net cash of RMB6.3 billion on Sep 30, 2020. Free cash flow decreased 11% year over year to RMB27.6 billion. Zacks Rank and Stocks to Consider
Currently, Tencent has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Etsy, Inc. ( ETSY Quick Quote ETSY - Free Report) , Applied Materials, Inc. ( AMAT Quick Quote AMAT - Free Report) and Agilent Technologies, Inc. ( A Quick Quote A - Free Report) . While Etsy currently sports a Zacks Rank #1 (Strong Buy), Applied Materials and Agilent carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Long-term earnings growth rates for Etsy, Applied Materials and Agilent are pegged at 25.2%, 13.7% and 9%, respectively. Zacks Names “Single Best Pick to Double”
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