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Gaming And Messaging Drive Up Tencent Q4 Revenue And Stock

Tencent Holdings showed the growing maturity of China’s love for all things Internet with a fourth-quarter earnings report containing strong growth in online games and social networking revenue. Tencent ( TCEHY ) said revenue surged 45% in local currency to $4.7 billion, beating the consensus estimate of $4.3 billion. Tencent shares, which trade over the counter in the U.S., rose 4% to 20.36 Thursday. The company’s primary stock listing is in Hong Kong, where it is the heaviest-weighted component of the 50-issue benchmark Hang Seng index, accounting for more than 10% of the index. Profit fell slightly short in Q4 as Tencent continues to aggressively invest in video content and mobile operations. Tencent reported earnings per share minus items of 12 cents, up 21% from a year earlier, though the result was a penny short of the consensus estimates as polled by Thomson Reuters. The company reported a net profit of $1.1 billion, up from $905 million a year earlier. “The overall results were pretty strong, with mobile gaming really exceeding expectations,” said Henry Guo, an analyst at ITG Investment Research. “One concern is the money Tencent is spending to acquire video content, but management believes they have the scale to mitigate the bottom-line pressure of content costs.” In 2015, Tencent made heavy investments to expand its library of exclusive premium videos. Tencent has an exclusive partnership with the National Basketball Association to broadcast NBA games in China. Tencent also has an agreement with Walt Disney ( DIS ) to be the exclusive online distributor of the first six “Star Wars” movies. The expanding video catalog led to a six-fold increase in video subscriptions year over year, as mobile daily video views nearly doubled over that time, the company said. Tencent is among China’s Internet leaders, along with e-commerce king Alibaba ( BABA ) and search leader Baidu ( BIDU ). Other China Internet leaders include e-commerce company JD.com ( JD ) and NetEase ( NTES ), which is the second-largest gaming company in China by revenue, after Tencent. Despite a slowing China economy, its Internet leaders have continued to show healthy growth. On Feb. 24 NetEase reported Q4 earnings that beat estimates. JD.com reported Q4 earnings on March 1 that showed strong revenue growth and a smaller-than-expected loss. JD is the largest online direct-sales company in China. A year ago, JD formed a strategic partnership with Tencent. Alibaba also beat estimates when it posted Q4 earnings on Jan. 28. Alibaba provides e-commerce platforms used by businesses and individuals to sell goods and services. Its sprawling business includes cloud computing and mobile payment services. Chinese online travel agency Ctrip ( CTRP ) had a different story. It reported Q4 revenue Wednesday that jumped 50% in local currency and beat views, but the company’s Q1 revenue guidance widely missed expectations. At Tencent, revenue from online games, its largest revenue source, rose 33% to $2.46 billion in Q4, primarily driven by growth from smartphone games through its WeChat and QQ mobile platforms. Monthly active users for its QQ messaging platform for mobile increased 5% year over year to 853 million. Monthly active users on its WeChat mobile messaging service rose 39% to 697 million. Both products serve as a strong distribution platform for Tencent games and digital content offerings. They also send massive volumes of traffic to Tencent’s social networking service, enabling a boost in online advertising. Online advertising revenue rose 118% year over year to $880 million. “Our connection strategy has really extended WeChat and mobile QQ from being social communication tools to becoming platforms for games, publishing, social advertising, premium content distribution and provisioning of other online services,” said Tencent President Chi Ping Lau in the conference call with analysts. Revenue from its social network and messaging services rose 37% to $1.1 billion. The increase was mainly driven by growth in subscription revenue, as well as higher revenue from virtual item sales.

Q4 Earnings Beat For Chinese Online Travel Firm Ctrip.com

Leading Chinese online travel agency Ctrip.com beat Wall Street estimates in Q4 but missed on Q1 guidance, sending the stock down Thursday. Fourth-quarter revenue jumped 50% from a year earlier to $444 million, the company reported , ahead of analysts’ average expectation of $438 million, in a Thomson Reuters poll. “Our philosophy is to underpromise and overdeliver,” Ctrip.com Chief Financial Officer Cindy Xiaofan Wang said. “It was another very strong quarter and it concludes the exciting year of 2015.” Earnings per American Depositary Share on a GAAP diluted basis were 3 cents, or RMB 0.19, better than the slight loss expected in Thomson Reuters’ analyst poll. ( Excluding share-based compensation charges (non-GAAP), Ctrip’s diluted earnings per ADS were 11 cents for the quarter.) Ctrip shares were down 0.4% near 42.50 in afternoon trading on the stock market today , after diving as low as 39.52 in the morning. Ctrip.com has an IBD Composite Rating of 84, where 99 is the highest. Ctrip.com guidance for the current quarter misses the average view of analysts polled by Thomson Reuters. In a statement accompanying the earnings results, the company said its top line would grow between 75% and 80% in Q1 2016, “reflecting the consolidation of Qunar’s financial results.” Goldman Sachs analyst David Jin called the Q1 guidance “soft” but maintained his buy rating with a price target of 55. A Ctrip share trade in October with Chinese Internet company Baidu ( BIDU )   gave Baidu a greater role in the online travel industry, as China Internet companies position for growth from the online-to-offline, or O2O, services niche. The share-swap deal gave Ctrip.com a larger stake in  Qunar Cayman Islands ( QUNR ), which also reported earnings on Wednesday. Qunar stock was up about 1.9% near 36.20 in afternoon trading Thursday. “The deal will help the whole industry have a chance to achieve long-term profitability,” Xiaofan Wang said. “In the past, competitors have lost tons of money to compete for market share.” Alibaba Group ( BABA ) and Tencent Holdings ( TCHEY ), which reported earnings Thursday morning , have become early players in that field. American online travel giants such as TripAdvisor ( TRIP ) and  OTA giant Priceline ( PCLN ) assuaged Wall Street’s concerns about a slowing global economy — neither firm reported a material impact from the signs of a slowdown. Though rival  Expedia ( EXPE ) missed Wall Street expectations for Q4, the company’s executives also said they were not seeing a slowdown — but the strong dollar has continued to weigh heavily on its results. That may change in the future, Expedia executives said. RELATED:   3 Chinese Internet Stocks Make Moves After Earnings .

Twitter ‘Uptake’ Stymied By Facebook-Owned Instagram And Snapchat

Struggling social network Twitter ( TWTR ) is being derailed by newer social services including Facebook ( FB )-owned Instagram and privately held Snapchat, according to research group eMarketer, which on Thursday lowered its growth projections for Twitter’s 2016 ad revenue. The growing popularity of chat apps has also “slowed Twitter uptake among younger social network users,” eMarketer said in its report. For 2016, eMarketer expects Twitter to generate $2.61 billion in worldwide ad revenue, down 11% from eMarketer’s earlier prediction of $2.95 billion. Twitter will generate nearly 90% of its revenue – or $2.32 billion worldwide – from mobile this year. That compares with the estimate of $2.62 billion in mobile revenue that eMarketer had forecast in Q3. “Until the company can show that its efforts to restart the growth engine are working, we will stay on the conservative side when it comes to forecasting Twitter usage,” eMarketer principal analyst Debra Aho Williamson told IBD via email. Twitter also has also failed to show “material monetization of logged-out users,” said eMarketer senior forecasting analyst Martín Utreras. “Events like the U.S. election and summer Olympics this year may prove pivotal to the success of this strategy.” Twitter is seen having 291.0 million users worldwide in 2016. Nearly 57 million people in the U.S. – about 30% of social network users, 21% of Internet users and 17.5% of the nation’s population—will use Twitter at least once a month in 2016, eMarketer said. Twitter’s U.S. user base is forecast to expand 8.0% this year, slightly slower growth compared with Pinterest and Tumblr. But Twitter will maintain significantly higher yearly growth rates through 2018 compared to social network leader Facebook and the broader social networking audience, the report said. Twitter is forecast to rank No. 8 by percentage of net digital advertising share held worldwide, with a 1.4% share, eMarketer said. Alphabet ( GOOGL )-owned Google is expected to rank No. 1, with nearly a 30% share. No. 2 Facebook is expected to hold a 12% share of net digital advertising share in 2016, the report said, while No. 3 Baidu ( BIDU ) will hold a 6.1% share and No. 4 Alibaba Group ( BABA ) will hold a 5.9% share. The continued slowdown in Twitter usage came despite a series of new features it rolled out last year, including video tool Periscope and Moments. Twitter reported that user growth slowed for the fourth consecutive quarter in Q4 as it guided Q1 revenue below consensus estimates, raising concerns that usage may be peaking, prompting buyout rumors. The average monthly active user base rose 9% year over year in Q4 to 320 million. Wall Street had expected Twitter to report a 12% rise in users to 323 million. Growth has cooled from 18% in Q1, to 15% in Q2 and 11% in Q3. Twitter, which doesn’t get a high IBD Composite Rating currently, was up more than 2% in afternoon trading in the stock market today , near 17. Image provided by Shutterstock .