Tencent shares slide after revenue miss and margin warning

FILE PHOTO: A sign of Tencent is seen during the third annual World Internet Conference in Wuzhen town of Jiaxing, Zhejiang province, China November 16, 2016. REUTERS/Aly Song/File Photo

HONG KONG (Reuters) - Tencent Holdings lost almost $20 billion from its market value on Thursday after the Chinese internet giant missed quarterly revenue estimates and warned that planned investments may hurt margins.

By noon Tencent shares were down 3.29 percent against a 0.63 percent dip in the benchmark Hang Seng Index, wiping $18.4 billion off the company’s market capitalization. They had dropped as much as 4.6 percent earlier in the morning.

Tencent posted a 98 percent jump in quarterly net profit on Wednesday, beating estimates, though revenue grew slower than expected at 51 percent.

With a market capitalization of about $542 billion, Tencent is Asia’s most-valuable listed company and the world’s No.5 behind Apple, Alphabet, and Microsoft.

Company President Martin Lau warned at a briefing on Wednesday that the company plans to invest “aggressively” in areas including video and payment, which may hurt margins.

Tencent’s gaming revenue in the last quarter was disappointing, as average revenue per user declined quarter-on-quarter, Jefferies analyst Karen Chan said.

But she said the outstanding performance of Tencent’s new mobile games this year boded well for growth, and that rapid adoption of WeChat in-app services may lead to more monetization potential.

“We expect FY18 to be another year of investment but view it necessary to further expand its market leadership in video and offline payment,” she said in a note accompanying a target price raise by 1 percent to HK$530.

Reporting by Sijia Jiang; Editing by Muralikumar Anantharaman and Stephen Coates