During a slump in US technology stock prices and worsening trade tensions between the US and China, internet giant Tencent Holdings Inc. (HKG: 0700) has lost approximately $150 billion in market value since 2018 began. This is the biggest loss for a technology company globally. Many analysts are reducing revenue estimates and removing the stock from their top stock lists. Brokerages such as Credit Suisse Group AG (NYSE: CS) have slashed their price targets, and firms like Morgan Stanley (NYSE: MS) have removed the company from their stock highlights. Tencent remains to be a well-regarded and recommended option for investment.
Due to the popularity of its messaging service WeChat, Tencent boasts of a revenue return surpassing 49,000% since it went public in 2004. The market value gained from the messaging service alone allowed the company to gain a return bigger than any other stock across the world. This led many investors to chase after shares, contributing to a total share purchase of 30% of the company. As of today, Tencent remains to be the second-largest technology company in Asia, only trailing behind the giant Alibaba Group Holding (NYSE: BABA).
Nevertheless, the recent sharp decrease in the technology market - a market that until now has boasted consistent nine-year increase globally - is only increasing investor anxiety regarding Tencent. Linus Yip, a strategist based in Hong Kong, notes that "investors are increasingly pricing in lower expectations for Tencent's interim results...overall, tech companies are facing a similar problem. They have been enjoying fast profit growth in the past few years, so it will be difficult for them to maintain similar growth in the future as the competition grows and some segments are saturated."
The technology sector does not seem to be bouncing back anytime soon. The social media and networking powerhouse Facebook (NASDAQ: FB) has lost a heavy $136 from their total market value, the second-highest loss after Tencent. Services offered by technology companies, like Tencent's mobile gaming unit, are facing a stall in growth. Tencent's gaming services alone have contributed to the company's overall decrease in stock, which fell approximately 9.8% in the month of July. Likewise, the rising uncertainty regarding trade has been fueled by the Trump Administration's series of threats and sanctions over the past six months. Recently, President Trump approved an increase of 25% on $34 billion worth of Chinese goods. In response to China's rebuttal of high tariffs, Trump has reportedly threaten to add 10% tariff increase on $200 billion worth of Chinese goods. For Tencent, an increase in tariffs may not bode well for a company already suffering from an extensive slump in revenue and growing investor concern.