How Tencent Holdings Ltd (OTCMKTS:TCEHY) Stacks up Against Alibaba

How Tencent Holdings Ltd (OTCMKTS:TCEHY) Stacks up Against Alibaba


Tencent Holdings Ltd (OTCMKTS:TCEHY) is one of the rising stars from China’s technology boom. TCEHY will forever be linked to the other star in China’s starry sky, Alibaba (BABA). These twin titans of the Asian world are both part of the exclusive club with $500 billion in market cap. But, while both TCEHY and BABA are growing at an explosive rate, which one is actually the better investment long-term?

Overall, analysts have become unconvinced about TCEHY’s ability to uphold its blazing-fast growth rate, partly because the rate of smartphone penetration and usage growth could start to slow down in China. However, the company’s main growth prospectus – a fifth of TCEHY’s revenue – comes from advertising. For instance, TCEHY could produce superior advertising revenues from its social media platforms, as well as its video streaming business, which has about 450-million active monthly users. TCEHY was also taking market share from search engines such as Baidu with its WeChat search function, while its e-commerce business was winning market share from BABA’s Taobao. It had also become the second-largest cloud services provider in the country.

 Tencent Holdings Ltd (OTCMKTS:TCEHY) is an investment holding company principally involved in the provision of value-added services (VAS) and online advertising services. The Company operates through three main segments. The VAS segment is mainly involved in provision of online/mobile games, community value-added services and applications across various Internet and mobile platforms. The Online Advertising segment is mainly engaged in display based and performance based advertisements. The Others segment is mainly involved in provision of payment related services, cloud services and other services.

TCEHY’s WeChat, the most popular messaging app in China, has 980 million monthly active users (MAUs) worldwide. Its older QQ messaging app reaches 653 million MAUs, while its social network Qzone has 568 million MAUs. Its gaming portfolio includes blockbuster games like Honor of KingsLeague of Legends, and Clash of Clans. TCEHY doesn’t have much of a presence in the e-commerce market. That’s why it gradually expanded WeChat into a multi-function platform for deliveries, online purchases, mobile payments, and other services.

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Furthermore, TCEHY’s move into the fintech world has been another bright spot. This unit of the company’s expansive operation is now a mid-sized traditional consumer bank. The payment sector in China is growing and the company uses traffic to sell financial products and insurance. The payments business in China is also aligned for greater growth. Apropos, TCEHY had a 75% share of the country’s offline mobile payments business. This refers to payments for goods and services using applications such as WeChat.

Meanwhile, BABA announced another quarter of impressive growth but saw the stock tumble a bit after falling short of expectations. Despite its colossal $523 billion market capitalization, Alibaba’s revenue jumped 56 percent compared to the same quarter a year on strong performances from its e-commerce and cloud services businesses in China. In addition to the top-and bottom-line numbers, Alibaba reported a 57% jump in core commerce revenue to $11.25 billion. Cloud computing revenue was up 104% to $553 million. Digital media and entertainment revenue was up 33% to $832 million. As part of the call, BABA also said that they would be putting up a 33% stake in Ant Financial – a Chinese payment behemoth.

The latter bit of news pits these two directly against each other.

In conclusion, BABA is the most recognizable name in China – as Jack Ma is the country’s richest man and owner – but TCEHY is no slouch and no one is invincible in an economy that is growing as fast as China’s.

Tencent Holdings Ltd (OTCMKTS:TCEHY) must be on your watch list and should continue to play chess with BABA for internet supremacy. We expect it to be a very good year for both companies, regardless. For more information on $TCEHY, and similar types of fast-moving OTC stocks, sign up for our free newsletter today and get our next hot stock pick!