Is Tencent Still an Opportunity After Record-Breaking 2025 Offshore Bond Sales?

So, you are staring at Tencent Holdings and wondering what your next move should be. After a wild few years on the market, Tencent has come roaring back in 2025. If you have been tracking the numbers, you probably noticed its share price shot up 54.8% year-to-date and gained an impressive 160.8% over the past three years. Recent surges, like the 7.5% jump this month, have caught investors’ attention, especially as the broader Chinese tech sector remains in flux.

What has been fueling all this activity? Part of it comes from Tencent’s aggressive moves beyond gaming and social media, making headlines with bond issuances and high-profile AI talent acquisitions. Its recent record offshore bond sales, helped by favorable borrowing conditions, signal strong financial flexibility. At the same time, the recruitment of a top AI researcher shows the company is serious about staying ahead of the innovation curve. Even legal battles, such as the dust-up with Sony over game similarities, are reminders that Tencent is a major industry player shaping the conversation in global tech.

With the company currently undervalued in 2 out of 6 commonly used valuation checks, Tencent scores a 2 on our value scale. Does that mean the stock is a bargain, or is the market already pricing in all its future potential? Next, we will break down those valuation checks and see where Tencent stands. Then, stick around for deeper insight that will help you make the smartest call on Tencent’s true value.

Tencent Holdings scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Tencent Holdings Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by extrapolating future cash flows and discounting them back to today's terms. This helps investors determine what Tencent Holdings might truly be worth, instead of relying solely on market sentiment.

For Tencent, the DCF analysis draws on recent and projected cash flows reported in Chinese Yuan (CN¥). Currently, Tencent generates a robust CN¥201.4 billion in Free Cash Flow (FCF), with analyst projections showing steady annual growth. By 2028, FCF is expected to reach approximately CN¥321.7 billion. Simply Wall St extrapolations foresee further increases, hitting CN¥476.7 billion by 2035. Most projections for the next ten years indicate a consistent upward trend, reflecting Tencent’s ongoing expansion and operational strength.

The DCF model calculates Tencent’s estimated intrinsic value at CN¥747.14 per share. This assessment points to the stock trading at a 13.8% discount compared to its fair value, indicating that Tencent shares may be undervalued at their current market price.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Tencent Holdings.

Our Discounted Cash Flow (DCF) analysis suggests Tencent Holdings is undervalued by 13.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Tencent Holdings Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used metric for valuing profitable companies like Tencent Holdings. This measure is particularly effective because it connects a company's current share price with its earnings power, making it easier to compare businesses of varying sizes and across different industries. Generally, companies with higher expected growth and lower risks command higher "fair" PE ratios. In contrast, slower-growing or riskier businesses trade at lower multiples.

Currently, Tencent’s PE ratio stands at 25.7x. This places it slightly above the Interactive Media and Services industry average of 24.1x and in line with leading peers at 24.9x. However, Simply Wall St’s proprietary Fair Ratio for Tencent is calculated at 32.5x, factoring in growth prospects, profit margins, risk profile, industry, and market capitalization. The Fair Ratio goes a step beyond peer or industry averages by offering a more tailored benchmark that takes into account the specific strengths and potential risks facing Tencent today.

Comparing Tencent’s current PE ratio of 25.7x with the Fair Ratio of 32.5x suggests the stock may be undervalued relative to its fundamental profile. The difference is substantial and may hint at untapped upside if the company delivers on expected growth.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Tencent Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. Narratives are a new, intuitive method for powering your investment decisions: they allow you to combine the story you believe about Tencent Holdings with your assumptions about its future, such as expected revenue growth, margins, or risks, and then see what those numbers imply for fair value.

Rather than just crunching static data, Narratives help you link a company's real-world prospects and industry developments directly to a financial forecast, so you can see how your view translates into an estimated fair value. On Simply Wall St's Community page, users create and update Narratives, with millions of investors contributing diverse perspectives. This makes the tool accessible for everyone, not just financial analysts.

With Narratives, you can easily compare your calculated Fair Value to the current share price and decide if it is time to buy or sell. Because Narratives update automatically as new news or results come in, your insights always stay relevant. For Tencent Holdings, for example, some investors forecast robust AI-driven growth and see fair value above HK$800 per share, while more cautious community members price in regulatory and competitive risks with fair value near HK$500. This shows how your Narrative can directly guide your next move.

For Tencent Holdings, we'll make it really easy for you with previews of two leading Tencent Holdings Narratives:

🐂 Tencent Holdings Bull Case

Fair Value: HK$813.65

Current Undervaluation: 20.9%

Revenue Growth Projection: 15%

• Tencent’s diverse businesses, ranging from Weixin ecosystem innovations and gaming expansion to fintech and SaaS integration, are expected to drive high-margin growth across multiple segments.
• Strategic bets on AI, including improvements in advertising and content creation, plus global investments and partnerships, provide new revenue channels and enhance operational efficiency.
• Main risks include geopolitical issues such as U.S. blacklisting and intensified competition from major tech rivals and innovative startups, but efficiency improvements are projected to support a 14% CAGR in the next five years.

🐻 Tencent Holdings Bear Case

Fair Value: HK$508.40

Current Overvaluation: 26.7%

Revenue Growth Projection: 12%

• Even with robust growth drivers such as cloud expansion, AI, and a dominant gaming and social media position, Tencent faces serious regulatory scrutiny and slowing user growth within its domestic market.
• Geopolitical risks, economic fluctuations, and high dependence on gaming revenue heighten volatility and threaten profitability, especially amid tough global and domestic competition.
• Innovation pushes into areas like the metaverse bring high development costs and execution risks, while data privacy concerns and increased compliance burdens add further uncertainty.

Do you think there's more to the story for Tencent Holdings? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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