Bank of America Securities: Maintaining Tencent Holdings (00700) “Buy” Rating Target Price of HK$780

The Zhitong Finance App learned that Bank of America Securities released a research report stating that it maintained the “buy” rating of Tencent Holdings (00700), with a target price of HK$780, and lowered the non-IFRS net profit forecast for 2026 to 2028 by 2% to 6% due to increased depreciation. According to Bank of America Securities, Tencent's rapid catch-up in terms of model power and computing power accumulation may become a turning point similar to the “Battle of Midway” and change the long-term competitive landscape.

The bank raised Tencent's capital expenditure forecast for the 2026 and 2027 fiscal years to 210 billion yuan and 260 billion yuan respectively, but believes that the quarterly cash pressure caused by computing power will peak in the second to third quarter. With the increase in mobile computing power and the accelerated promotion of WorkBuddy, Tencent Cloud's revenue is expected to accelerate further in the second half of the year and next year; depreciation is expected to increase significantly in the next few quarters due to active investment in artificial intelligence; the iteration cycle is expected to accelerate, and Hybrid 4 is likely to be launched within the next three months, further narrowing the capability gap with China's most advanced models; as far as the WeChat AI agent (Xiaowei) is concerned, it is expected that it will gradually expand to more users as early as the fourth quarter of this year.