Tencent Holdings (TCEHY - Free Report) is reportedly working to unify its QR code system for mobile payments with China UnionPay.
Per Bloomberg, the common QR code system will allow Tencent and UnionPay customers to transfer or spend money using the same smartphone symbols.
This is likely to help the Chinese central bank-backed UnionPay network get a bigger footprint in the $27 trillion payments market, currently dominated by Tencent’s WeChat
Pay and Alibaba (BABA - Free Report) affiliate Ant Financials’ Alipay.
The unified QR code system is reportedly being tested on Android devices in eastern China’s Fuzhou city.
Tencent Holding Ltd. Price and Consensus
Partnership to Aid Fintech Growth
The partnership is in line with Tencent’s efforts to develop its fintech business. Notably, the company's fintech arm, Tenpay, is collaborating with UnionPay on relevant fintech services on a trial basis.
In third-quarter 2019, the company generated revenues of RMB 4.7 billion from its fintech and business services segment, up 36% year over year, driven by robust growth of commercial payment transactions as well as commercial payment volumes.
The company is also reportedly creating a new team to gain a foothold in the cryptocurrency market, which per marketstudyreport.com data cited by MarketWatch, is expected to witness CAGR of 11.9% between 2019 and 2025.
Further, the partnership is likely to solidify Tencent’s competitive position in China’s payments market, especially against its rival Alipay.
Tencent Hurt by Gaming Regulations in China
Tencent’s performance has been disappointing in recent times. The stock is down 1.5% from its 52-week high price of $52.14 on Apr 10, 2019. The decline can be attributed to increasing regulation on video games by the government.
Chinese officials have been cracking down on online games, with restrictions being placed on the total game time of minors. Moreover, all gamers, regardless of age, are prohibited from playing games that depict sexual explicitness, goriness, violence and gambling.
In such a scenario, Tencent’s expanding Fintech business, bolstered by the recently announced partnership, bodes well for the stock.
Moreover, Tencent recently announced its first major restructuring in six years, which will lead to setting up of a new cloud and smart industries business to take on Alibaba and increased investments in next generation technologies like AI, robotics, and quantum computing.
Zacks Rank & Stocks to Consider
Currently, Tencent carries a Zacks Rank #4 (Sell).
A couple of top-ranked stocks in the broader technology sector include Baidu (BIDU - Free Report) and Garmin (GRMN - Free Report) . Both sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Baidu and Garmin is currently pegged at 2.3% and 7.4%, respectively.
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