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Significant Events and Tencent’s Position in the Gaming Industry

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The contribution of Tencent’s gaming segment

In this part of the series, we’ll analyze significant events that have impacted Tencent Holdings (TCEHY) stock. The chart below depicts the quarterly segmental contribution to Tencent’s revenue. The online gaming segment continues to remain a crucial segment for the company.

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The crackdown by China’s regulatory bodies

On August 13, Chinese regulators suspended Tencent’s Monster Hunter: World game over regulatory compliance issues. It came within a week of its release. Online gambling and game addiction drove the decision. Tencent stock responded by falling 3% on August 13 and August 14.

NetEase (NTES) is another vital gaming distributor in China that has lost significant stock value. Gaming company Huya (HUYA) and Internet content and information stocks iQIYI (IQ) and Sina Weibo (WB) also lost value.

News of stalled approvals for online PC and mobile games spread in international media on August 15. The report is rumored to be an aftermath of a government restructuring in China (FXI). The events took a toll on major gaming companies in China and on Japanese gaming companies that have significant exposure to Chinese gaming companies.

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Tencent’s game approval list

Bloomberg reported that Tencent hasn’t received a green light yet for the desktop versions of its PlayerUnknown’s Battlegrounds (or PUBG) and Fortnite games. The company has not been permitted to monetize the mobile version of PUBG despite ~170 million installations.

Investment in a gaming major

In February, Tencent invested 3 billion yuan in Shanda Games, a major online gaming company in China.

Consensus estimate misses

Tencent missed both the revenue and EPS estimates for the second quarter of 2018. It missed four consensus revenue estimates in the last 20 quarters, the latest being the fourth quarter of 2017. The company has missed nine EPS estimates, the last being in the fourth quarter of fiscal 2016.

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