Analysts are predicting China's Tencent will climb back above $500 billion in value

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Tencent’s headquarters in Shenzhen, China, pictured in August 2016.

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Tencent is reporting second-quarter earnings on Wednesday and the the market is expecting the company’s core gaming business and its financial technology division to mean strong revenue growth.

The Chinese giant is forecast to report the following results for the June quarter:

  • 93.42 billion yuan ($11.9 billion) in revenue, according to estimates from Refinitiv. If realized, that would represent a nearly 27% year-on-year rise.
  • Profit attributable to shareholders of 20.74 billion yuan ($2.64 billion), according to estimates from Refinitiv. That would be a roughly 16% rise if it were hit.

Tencent’s troubles

In the three months to the end of March, Tencent logged its slowest pace of quarterly sales growth since it went public in 2004.

That was because the Chinese government halted game approvals last year. Video games need to be approved by regulators in order to be released and monetized in China. That hurt Tencent’s business, which relies on a large portion — nearly 41% in the first quarter — of revenue from online gaming.

Billions of dollars were wiped off the stock in 2018. China began approving games again at the start of the year and a number of Tencent titles got the green light. The company’s stock has staged a small revival and is up over 6% so far this year.

Analysts, meanwhile, have maintained confidence in Tencent. The average 12-month price target on the stock is 428.46 Hong Kong dollars, according to Reuters data. That represents an over 28% upside from Tuesday’s close and a market capitalization of $521.7 billion. If Tencent’s valuation rises above $500 billion, it would be the first time since March 2018.

Gaming revival

After the game approval freeze was lifted, Tencent was able to release titles like “Peacekeeper Elite,” which is also known as “Game for Peace.” It’s a similar game to “PlayerUnknown’s Battlegrounds Mobile,” a game that Tencent co-developed but that never received approval for monetization. Tencent pulled that game from China, replaced it with “Game for Peace” and migrated users over.

The game grossed $14 million in its first three days of availability in