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The Situation Has Improved, but Tencent Could Still Be Struggling

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Jan. 25 2019, Updated 11:04 a.m. ET

Two of Tencent’s new games have been green-lighted

Chinese tech giant Tencent (TCEHY) has been struggling in the last year or so as Chinese authorities have throttled the speed at which they’ve been approving licenses for online games in China for social reasons. The stock has plunged 30% in the last 12 months.

While the authorities gave the green light to 80 games in December after a nine-month freeze, Tencent’s games weren’t included. Online gaming makes up a good chunk of Tencent’s total revenue.

However, according to an announcement by China’s State Administration of Press, Publication, Radio, Film and Television (first reported by Tech Crunch), two of Tencent’s games were part of a group of nearly 200 games that were given licenses by Chinese authorities this month.

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Tencent could struggle to grow its gaming revenue

While it’s great news for Tencent that the authorities have started doling out licenses, it’s happening at a much slower pace than Tencent would like. Tencent also may not be able to get the green light for all its games, which will continue to be a headwind for the company in 2019.

However, Tencent has seen success via the extremely popular Fortnite. It has a 40% stake in Epic Games, which developed Fortnite.

The company has already started diversifying its sources of revenue by focusing on cloud and map services. Tencent has also been investing in a number of Asian companies.

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