Tencent Holdings Ltd. bought back shares worth HK$500.9 million on July 3, extending a daily repurchase campaign that has accelerated as the stock's slide erased about $309 billion in market value from its October peak.
"The buyback program reflects management's view that the stock is undervalued at current levels," Citigroup analysts led by Alicia Yap wrote in a note, adding that they expect increased buyback activity across Chinese internet firms as companies try to retain investor confidence.
The Shenzhen-based company has repurchased shares on nearly every trading session since mid-May, with June's expenditure exceeding HK$9 billion ($1.1 billion) — the highest monthly figure this year. Shareholders approved the repurchase of as many as 912 million shares, or roughly 10 percent of outstanding stock, at the annual general meeting on May 13. The stock now trades at 11.2 times one-year forward earnings, an all-time low that places it below utility operator CLP Holdings Ltd. at above 15 times.
Tencent's shares have fallen for five consecutive months, the longest losing streak since 2018, as investors question the returns from its artificial intelligence investments. The company plans to more than double AI-related capital spending to exceed 36 billion yuan ($5.3 billion) by 2026. Mainland Chinese investors, who historically provided support during downturns, have been net sellers for three consecutive months through June. The stock fell 1.8 percent in June, outperforming the Hang Seng Tech Index's 10 percent decline.
The buyback campaign signals management's confidence in Tencent's valuation and financial health. Investors will watch for signs of a turnaround in the second-half earnings season, with the company's AI monetization strategy a key focus.
This article is for informational purposes only and does not constitute investment advice.
