Tencent Holdings (0700.HK): Thoughts on Overreacted Share Sell-Off on Soft Gaming Fear

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Tencent Holdings (0700.HK): Thoughts on Overreacted Share Sell-Off on Soft Gaming Fear

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22 Jul 2026 12:02:39 ET │ 11 pages

Tencent Holdings (0700.HK)

Thoughts on Overreacted Share Sell-Off on Soft Gaming Fear

CITI'S TAKE

Buy We believe the 7% decline in Tencent's shares today (July 22) could be

attributable to market rotation back to AI hardware, renewed concerns of Price (22 Jul 26 16:10) HK$440.60

stepped-up AI investment that drag profit, and fear and Target price HK$758.00

"misinterpretation" of 2Q26 gaming grossing slowdown to a yoy decline in Expected share price 72.0% revenues. We believe the sell-off likely suggests an overreaction especially return

following decent rebound in recent weeks. While tracking data indicates a Expected dividend yield 1.3%

seasonal normalization in gaming grossing in 2Q, we expect reported Expected total return 73.4%

revenues to be smoother than expected, supported by deferred revenue

Market Cap HK$4,006,163M from previous quarters, stronger PC games performance that is not

US$510,870M captured by mobile tracking data. We currently forecast domestic games

revenue to +8% yoy and -3.9% qoq in 2Q26. Short-term fluctuations

shouldn't overshadow the fundamental strength of Tencent’s diversified

and globalizing gaming business, which underpins steady annual growth. Alicia Yap, CFAAC

We reiterate our Buy rating and HK$758 TP and view the dip as an +852-2501-2773

enhanced buying opportunity. alicia.yap@citi.com

Nelson Cheung

What's new? - During today's (July 22) Asia market trading hours, Tencent's shares nelson.cheung@citi.com

were down by >7%, which we believe could be driven by: 1) broader market rotation

back to AI hardware and in need of hedging, hence internet, gaming software names

become the sell-down candidates.