As Tencent sinks, analysts cut everything but their buy ratings

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HONG KONG (Aug 3): They’ve reduced price targets, lowered earnings estimates and pulled the stock from focus lists. But good luck finding an analyst who’s willing to ditch their “buy” recommendation on Tencent Holdings Ltd.

Even after the Chinese Internet behemoth lost more than US$150 billion of market value since late January, all 51 analysts tracked by Bloomberg have the equivalent of a buy rating on the stock — a tally unique among the world’s 50 largest companies. The recommendations have held firm despite at least 11 share-price target reductions since June, a more than 10% drop in second-quarter earnings estimates since March, and Morgan Stanley’s decision to remove the stock from three focus lists on Thursday.

It’s easy to see why analysts are reluctant to go much further. Tencent’s more than 49,000% return since its Hong Kong initial public offering in 2004 — fueled by the rise of its hugely popular WeChat messaging platform — is bigger than that of any other stock in the MSCI All-Country World Index over the same period. On the rare occasions when analysts have turned bearish, they’ve tended to regret it. When the number of sell ratings reached a record in 2013, shares rallied more than 30% over the following year.

Tencent’s 2018 slump has been fueled by concerns about slowing growth at its gaming unit, jitters over the Chinese economy’s vulnerability to a trade war, and a global selloff in technology shares. The next big catalyst for the stock may come on Aug 15, when Tencent is scheduled to release second-quarter results.