In this segment from Industry Focus: Tech, analyst Dylan Lewis is joined by Fool.com contributor Danny Vena to discuss the back door Tencent (TCEHY -1.31%) has that will enable it to grow internationally.
A full transcript follows the video.
This video was recorded on May 18, 2018.
Dylan Lewis: When I look at this company, Danny, I'm not so much worried about what's going on in China with them. I think they have the massive installed base there, to borrow what you said before, they're like the Facebook, PayPal, you name it, they are that company for China. What really becomes interesting to me is, can they grow this business outside of China, as well? They already have a huge runway within their domestic market, but if they can get outside of that, then the growth opportunities become even more interesting.
Danny Vena: And I think one of the things that you can look at is, with all of the other investments that they've made in companies outside of their core market, that gives them an in in so many different countries. They may not be able to replicate that type of success in their international markets as they have in China, just because the way we use apps is so segmented compared to China.
But, that said, they have so many ways into other countries -- for instance, Activision Blizzard and Epic Games. They're around a 40-45% owner of Epic Games, which is all around the world. So, they have ways to grow in international markets.
Lewis: And I think this company is a really great bet on a lot of trends that we really like in the tech space. We've talked a ton in the past on the show about the gaming industry and how successful Take-Two, Activision, EA have been as investments over the last five years. We look at esports as a megatrend that's really rising. This company has exposure to that. This company has exposure to mobile in general, but also the payments industry. I think that's really interesting.
This is a big business. Recently, I've tried to look for smaller tech players, just because I think the growth opportunities are better and the opportunities for returns are a little bit better. But I also look at them and I'm like, yeah, they're a $500 billion company, but out of any company that size, I think this is the most realistic double in the next five to ten years, that I can see.
Vena: I think you're right. This is a company that I'm looking to make a meaningful investment into. I only started studying this company in the last few months, and I'm really impressed with, like I said, not only the massive penetration that they have in the social media space, in the gaming business, in their native China; but also, they're investing in streaming video, they're investing in cloud computing, they're investing in digital payments. You put all that together, and I think they still have a massive opportunity ahead of them.