Goldman Sachs: Tencent (00700) valuation has bottomed out, maintaining a "buy" rating with a target price of 700 Hong Kong dollars.

Goldman Sachs released a research report stating that TENCENT (00700) stock price has fallen by 27% since the beginning of the year, mainly due to market concerns about the progress of its AI development and the weak visibility of the returns on consumer-side AI agent investments, leading to a contraction in valuation. The current price is estimated to have a price-to-earnings ratio of about 12 times for 2026. They believe that Tencent's valuation multiple has bottomed out and may provide support for the stock price, maintaining a "buy" rating for Tencent with a target price of 700 Hong Kong dollars. The report pointed out that Tencent has made initial progress in its AI strategy recently, including a significant year-on-year increase in AI capital expenditure, its Hy3 model ranking first in Token usage on third-party API channels, and good development in enterprise AI business such as Workbuddy. Goldman Sachs expects faster growth in Tencent Cloud and advertising revenue is expected to maintain high double-digit to 20% growth, while WeChat AI agents are expected to be piloted in the second half of the year.