JP Morgan: Tencent's core business still shows resilience, stock price not overly inflated by "AI premium".

JPMorgan Chase released a research report stating that it is expected that TENCENT (00700) will see a 12% year-on-year increase in total revenue to 193.7 billion yuan in the fourth quarter, in line with market expectations; adjusted net profit is expected to be 65.6 billion yuan, with an adjusted net profit margin increasing by 2 percentage points to 34%; the adjusted earnings per share is estimated to be 7.13 yuan. Additionally, the bank lowered the company's adjusted earnings per share forecast for 2026 by 1%, maintained a target price of 750 Hong Kong dollars, and rated it as "hold". The bank believes that Tencent's core engine in the WeChat ecosystem, advertising, and gaming businesses still have resilience, and expects that the impact of artificial intelligence on the stock price trend will surpass the expectation of profit growth. Compared to its peers, Tencent's generative AI layout is still in the early stages in terms of model display and independent application, as management will prioritize reliability, compliance, and ecosystem fit, rather than scale expansion. This positioning prevents its stock price from being overly valued with an "AI premium", and if the company can demonstrate clear execution and product-market fit this year, it will create upward value. Regarding the upcoming release of Tencent's fourth-quarter 2025 financial report, the bank expects the overall financial trend to roughly stay on track, with the main point of contention being whether macroeconomic weakness will affect cyclical businesses like advertising. Investors should pay attention to AI signals that can simultaneously affect market sentiment and fundamentals.