Investing.com-- Goldman Sachs (NYSE:GS) added Chinese internet giant Tencent to its APAC Conviction List- a list of 20-30 stocks it is bullish on in the region, while removing social media firm Kuaishou.
Tencent Holdings Ltd (HK:0700) replaced Kuaishou Technology (HK:1024) as the only internet sector pick on the list, which is otherwise largely populated by consumer, financials and technology stocks.
Goldman Sachs rates Tencent at a Buy with a target price of HK$477 with a 29% total return potential over the next 12 months.
The brokerage said that Tencent presents one of the “most visible and sustainable 20% profit growth set-ups amongst Chinese internet stocks.”
Tencent is expected to benefit from accelerated games revenue growth in both domestic and international markets on new titles, while the advertising market is also expected to improve.
Tencent’s commitment to shareholder returns through buybacks and dividends also made the stock appear attractive, GS said.
Tencent was trading up 24% so far in 2024, having benefited from a mix of bargain buying and expectations that the firm will benefit from a recovery in China, its biggest market. Optimism over the firm’s adoption of artificial intelligence also boosted the stock this year.
But the stock was also nursing three years of steep losses following increased government in China and concerns over slowing demand in the country.
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