Citi raises Tencent's target price to 751 yuan, reiterates "Buy" rating

Citi released a report stating that Tencent (00700.HK) continues its momentum into the second quarter of 2025, with a year-on-year revenue growth of 15% in the third quarter of 2025, while gross profit/operating profit/net profit growth rates are even faster, increasing by 22%, 18%, and 18% respectively, benefiting from high-margin revenue sources such as internally developed games, video accounts, WeChat search, and optimized productivity costs, although partially offset by strategic hiring of AI talent.

The report indicated that due to the inability to procure the required number of chips, capital expenditures in the third quarter of 2025 decreased by 24% year-on-year, but this did not slow Tencent's commitment to upgrading its foundational model architecture and developing AI capabilities within WeChat. The firm believes this will bring significant investment returns in the future.

The firm maintains a constructive view on Tencent, as the company continues to demonstrate robust execution, driving stable and sustainable revenue and profit growth, while actively pursuing AI goals in both enterprise and user application areas. After adjusting forecasts, the target price has been raised from HKD 735 to HKD 751. The "Buy" rating and preferred stock and AI investment target status are reaffirmed