The Hidden Reason Tencent May Be Woefully Undervalued

With Chinese stocks under fire these days, it's unclear exactly what effect the renewed U.S.-China tensions may have on their ultimate valuations. While many Chinese tech stocks have sold off after the scandal involving Luckin Coffee and the Senate's passage of the Hold Foreign Companies Accountable Act, it's entirely possible these distractions have opened up an opportunity in high-quality Chinese companies. After all, many Chinese stocks were under pressure throughout 2018 as the trade war escalated, only to appreciate handsomely in 2019 (and for some, even in this pandemic-affected year).

One of those hard-hit China tech stocks last week was blue chip tech giant Tencent Holdings (OTC: TCEHY). Yet Tencent actually reported quite solid first-quarter results recently. Its main online games, WeChat social media, and streaming video businesses spiked, offsetting some weakness in payments and the cloud amid the coronavirus pandemic.

And besides this solid performance, there's another, more hidden reason that Tencent might be woefully undervalued today.

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Source Fool.com