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Investing.com-- Tencent Holdings Ltd (HK:0700) saw a flurry of price target increases on Thursday after logging stronger-than-expected first-quarter earnings as its core advertising and gaming units were buoyed by artificial intelligence.
Bernstein raised its price target on the stock to HK$660 from HK$640 and maintained its Outperform rating.
Mizuho (NYSE:MFG) hiked its PT to HK$550.0 from HK$545, and maintained its Neutral rating.
Both brokerages lauded the Chinese internet giant’s Q1 earnings, which Bernstein called a “top-to-bottom” clean beat.
Tencent’s revenue growth of 13% beat expectations, with the company claiming that AI was bolstering its gaming and content offerings. The improved returns came amid a moderate increase in capital expenditure.
Improving consumer conditions in China also appeared to be benefiting the internet giant, especially as its videogame revenue growth in China rose to 24%, much more than expectations of 17%.
Tencent’s advertising revenue growth surged to 20% in Q1, more than expectations of 17%.
Tencent’s Q1 revenue was at 180 billion yuan ($24.98 billion), while operating profit was 69.3 billion yuan.
Mizuho said it expects increased user engagement with Tencent’s products as more AI features are introduced, especially with core products such as WeChat search.
The company’s targeted advertising was boosted by AI additions, while in-game user experiences also improved thanks to AI, analysts noted.
Berenstein, which is more bullish on Tencent, said management commentary on the earnings call appeared confident, and also noted that management was concentrating on the long-term boosts of AI over short-term growth.
“We generally agree with this approach, and argue that the market continues to mis-price the durability of Tencent’s growth,” Bernstein analysts wrote in a note.