Tencent Holdings (700 HK) is a consensus buy with none of the 46 analysts covering it having an underperform or sell recommendation. Analysts' optimism is supported by the share price which is up 23% YTD. While Tencent is undoubtedly a blue-chip tech company, it does not mean the shares are a slam-dunk buy.
We have outlined our Tencent bear case across two research notes. In Tencent Bear Case: The Growth Illusion (Part 1), Rickin Thakrar argues that the market underestimates the growth dependency of Tencent’s business on its equity investments and the capex required to sustain growth. In Part 2, we outline the challenges faced by Tencent's VAS and online advertising businesses.
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