Tencent's (OTC:TCEHY) stock recently dipped after founder and CEO Pony Ma sold five million shares to raise about HK$2 billion ($257 million) over four consecutive days. The sale reduced Ma's stake in Tencent from 8.58% to 8.53%. A Tencent spokesperson claimed that Ma's sale was for personal financial purposes.

This marks Ma's first major stock sale since Oct. 2017, when he raised HK$2.1 billion ($270 million) by selling shares for four straight days. Back then, Ma claimed that he was selling his stock to raise money for charity. Ma's recent sale raises a few eyebrows, since it follows the stock's rally of about 20% over the past three months -- but I think it's premature to follow his lead.

Cash rains on a seated businessman.

Image source: Getty Images.

Reviewing Tencent's headwinds and tailwinds

Tencent's three core growth engines -- video games, digital advertising, and its fintech and business services unit -- all face significant headwinds. Its gaming business faces stiff competition from domestic rivals like NetEase (NASDAQ:NTES), unpredictable moves by Chinese regulators, and the ongoing slowdown of its PC gaming business.

Its advertising business faces a slowdown in the Chinese economy and competition from newer challengers like ByteDance and established rivals like Baidu (NASDAQ:BIDU). Its cloud and fintech units also face intense competition from Alibaba and its affiliate AliPay, respectively. Here's how Tencent's core businesses fared so far in fiscal 2019:

Year-over-year revenue growth

Q1 2019

Q2 2019

Q3 2019

Online gaming

0%

8%

11%

Online advertising

25%

16%

13%

Fintech and business services

44%

37%

36%

Total revenue

16%

18%

21%

Source: Tencent quarterly reports.

Tencent's advertising and fintech and business services units lost momentum throughout the year, but the acceleration of its online gaming revenue (29% of its top line last quarter) and its investments in other companies boosted its total revenue growth.

Yet those investments also make it tough to gauge Tencent's earnings growth. Its GAAP earnings, which include its gains and losses from those investments, are significantly more volatile than its non-GAAP earnings, which exclude those investments:

EPS growth

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

GAAP

30%

(32%)

17%

25%

(13%)

Non-GAAP

15%

13%

14%

17%

24%

Year-over-year. Source: Tencent quarterly reports.

However, Tencent has been gradually dialing back its investments, cutting costs with layoffs and restructuring efforts, and buying back shares. Those moves all stabilized its non-GAAP earnings growth over the past year.

Analysts still expect Tencent's revenue and earnings to rise 23% and 21%, respectively, next year. Those are solid growth rates for a 21-year-old company, but a lot of that growth is arguably baked into the stock, which currently trades at 30 times forward earnings.

Is Ma stepping back from the non-core businesses?

Ma's stock sales in January coincided with his resignation as the chairman and general manager of Tenpay Micro Loan, the part of its fintech business that grants small loans to consumers.

A man uses a financial app on a smartphone.

Image source: Getty Images.

Ma also resigned as the legal representative and executive director of Tencent Credit last September. These moves all indicate that Ma is stepping back from Tencent's fintech business, a major growth engine that's also highly exposed to tighter government regulations.

Ma is only 48 years old, but he could also be gradually stepping back from Tencent's non-core businesses -- as JD.com (NASDAQ:JD) founder and CEO Richard Liu recently did -- to spread out his responsibilities or make way for a potential successor.

However, investors should note that Tencent president Martin Lau also sold half a million shares to raise HK$192 million ($25 million) in January. Lau previously sold a million shares for HK$430 million ($55 million) in March 2018. Those two transactions reduced Lau's stake in Tencent to about 0.5%.

The key takeaways

Tencent's strengths still clearly outweigh its weaknesses, and it still has plenty of irons in the fire. Its stock isn't cheap at these levels, so it isn't surprising if Ma and other top executives sell some shares to raise cash. However, I believe Ma's minor sale shouldn't raise any red flags for long-term investors.