What happened
A new analyst note catalyzed buying in the American Depositary Receipts (ADRs) of Tencent Holdings (TCEHY 2.19%) on Wednesday. That security enjoyed a very pleasant price pop of more than 4% on the day following the note's publication, a rise that easily beat the S&P 500 index's 0.7% advance.
So what
What helped was that the analyst in question works at a very high-profile bank. He's Alex Yao of JPMorgan Chase (JPM 0.06%), and he reiterated his overweight (read: buy) recommendation on Tencent. His price target for the company's Hong Kong-listed shares is 440 Hong Kong dollars, which converts to $56.21. That's well above the current price of the ADRs, which stands at $44.81 apiece.
Tencent, a sprawling tech company based in mainland China, is the world's largest video game publisher. It's also the company behind the immensely popular WeChat online ecosystem that marries a host of tech functionalities to fintech services. Finally, it controls the near-eponymous Tencent Music and is very active in the cloud computing sphere.
Yet its stock has been something of a yo-yo lately. It suffered from a long crackdown on the domestic tech sector by Chinese authorities, who were particularly concerned with the video game industry. China was also, of course, hit hard by the coronavirus pandemic.
Now what
It wasn't clear why Yao maintained his bullishness on Tencent in the face of its recent challenges. Despite those headwinds, though, the company remains a powerful force in many segments of the country's tech scene. Additionally, the government finally seems to be relenting on the tech crackdown generally and its video gaming worries specifically. Tencent could sure benefit from a more relaxed regulatory environment.
