Beliefs about penguins are collapsing.
For more than a year, the stock price has plummeted, without resistance, from a height of 747 to a new low of 288. Go back to the place where “King & Glory” started five years ago .
Some retail investors lost 50% of their blood and left the market with tears. They said, “More than 700 people bought Tencent. Although they were cut in half, they resolutely cleared their positions. Tencent’s problem is not that it is temporarily ‘changing the sky’, but that it has become a saline-alkali land.” .
More investors resented Duan Gushen (Duan Yongping), scolding him for singing too much, and operating Tencent $Tencent Holdings (00700)$ 8 times. As a result, their positions were less than 1%, while their own positions had already exceeded 40%. , properly cut the leek behavior.
Coincidentally, the famous stock big V Tang Dynasty is also on this list. It is said that he is an Excel stock trader.
In fact, even the optimists cannot deny the difficulties they encounter with current regulation, game problems, and the impact of Douyin. As for when the future will pick up, he just said angrily, “Trust the team of Pony Ma and the rose of time”.
Of course, there are also people who don’t think it’s a big deal to watch the show, joking and mocking, ” If it falls below 250, I will lighten up Maotai and go south to help Tencent .”
In short, there is a lot of people talking about “Wrong Payment to Tencent for the Past Five Years”. To a certain extent, all living beings have formed a tacit understanding.
The old-fashioned king has been reduced to a recreational talk, allowing people to arbitrarily disregard it, and the belief in its value collapsed suddenly.
So, is Tencent (stock price) really helpless, and will it “wrongly pay for the next five years”?
When we opened up the pattern and reviewed the reasons for the formation of previous excess returns in the 18 years that Tencent went public, the answer suddenly became clear.
Remarks: Select the excess return range 1. 2006.12-2007.10: the highest rate of return is 352%; 2. 2009.3-2010.2: the highest rate of return is 300% (the excess return in this paragraph is a continuation after the financial crisis was interrupted); 3. 2013.7- 2014.6: the highest yield is 161%; 4. 2017.1-2018.2: the highest yield is 145%; 5, 2020.4-2021.2: the highest yield is 113%.
In essence, behind every amazing rate of return, there are repeated industry interpretations and changes. Specifically, with regard to Tencent’s excess returns, there are the following three cycle characteristics:
1. Technology-driven periodicity, semiconductor iteration is the leading signal
2. Diminishing margin of excess returns, multi-dimensional judgment space and odds
3. The market awareness gap is quickly filled, and the effective window period is shortened sharply
1. Technology-driven periodicity, semiconductor iteration is the leading signal
“How can the shy and quiet Ma Huateng become an entrepreneur?”
This is the unanimous evaluation of Ma Huateng’s (interviewed) middle school and university classmates and teachers in the book “Tencent Biography”.
In fact, Ma Huateng’s positioning for himself is also the same. When QQ was first launched in 1998, he only dared to set the limit of users to 100,000.
But in less than ten years, Tencent has 400 million-level portals – QQ, Qzone, QQ Games and Tencent.com. Ma Huateng also attacked everywhere, making enemies on all sides and becoming a “public enemy of the whole people”.
Regarding the history he created, Ma Huateng said at the time: “At a certain level of fact, I don’t know how to tell the story of Tencent to others.”
And time stretched to the present, a clear reference line appeared:
Tencent’s previous excess returns are surprisingly consistent with the semiconductor sales trend in year-on-year data.
That is to say, every time a semiconductor flaps its “wings”, it will trigger Tencent’s “hurricane” .
On March 12, 2003, at the press conference of the Diaoyutai State Guesthouse in Beijing, Intel management, who took turns to promote the latest “Centrino” technology, shouted: “We have to give consumers a reason, a reason to buy a notebook computer.”
The source of the reason is related to the semiconductor process. Around 2000, the size of the semiconductor process was reduced to below 0.18um (180nm), and the industry as a whole entered the sub-micron era.
This greatly promotes the process of PC thinning. In 1997, IBM launched the world’s first 14-inch notebook computer with a built-in DVD drive.
During the same period, communication technology also iterated to 3G network. This makes it a reality for popular games like Red Alert and StarCraft to run smoothly on PC.
Or it is precisely to capture the innovative iteration of technology, Intel released the Centrino platform in 2003, and the wireless network card became the standard configuration. Everyone can surf the Internet anytime, anywhere, and notebook computers have entered the era of consumption.
It can be seen that the global sales of the semiconductor industry reached a peak from 2002 to 2004 under the sharp increase in the demand of PC hardware manufacturers.
The upstream stocking supply is sufficient, the functions of the downstream new products are highly iterative, and the demand for replacement is strong. The global PC sales market lags the semiconductor cycle by one year, and also ushered in a sales peak in 2003.
Computers have changed from a niche to a mass product. The simple office (mailbox), news (portal), and comment writing (BBS) applications before are obviously unable to meet wider needs. Thereby, a new application cycle starts .
In 2005, Wang Wei, a “literary and artistic youth” who returned from his resignation from the United States, rented a three-bedroom apartment in Shanghai, and led four people to start Tudou. Afterwards, a large wave of vertical video sites such as Youku and Kuliu emerged, and China Online Video Industry starts.
In the same year, Wang Xing and Wang Huiwen from Tsinghua University and Tianjin University established the intranet in Beijing, and the social ecology took shape.
In 2008, the web game “Happy Farm” was born, and it captured a large number of users with the characteristics of fast loading and playable in fragmented time.
These applications have successively iterated on the previous consumption methods and ushered in explosive growth.
Most of Tencent’s businesses have kept up with this wave of rides.
In 2006, which is called “social network enlightenment”, QQ’s MAU reached 230 million, and the number of online accounts exceeded 20 million at the same time.
In terms of games, we launched the QQ game lobby against Lianzhong; launched “QQ Hall” against Shanda’s “Bubble Hall”; launched “QQ Farm” against “Happy Farm”, and quickly became a leisure player by leveraging QQ users and traffic. Game market leader.
In heavyweight games, popular titles such as “Dungeon and Warrior” and “Cross Fire” have allowed Tencent to replace Shanda as the game company with the highest market share in China since 2009, which has helped the stock price to take off to a certain extent.
In addition to the birth of new applications, we can also see in this wave of technology cycles that Google launched the Google AdWords PPC mechanism in 2002, ushering in the era of performance advertising.
This concept of precise traffic quickly spread to China. As shown in the figure below, after 2005, the share of domestic search advertising has been increasing, squeezing the share of portal advertising.
In this regard, Tencent uses QQ to proactively deliver news to users, and combines local portals with regional news through QQ IP addresses, which is more accurate than NetEase and Sina.
Based on this, it ranks among the three major portals in 2006Q1, and its online advertising revenue in 2012 reached 3.4 billion, making it the largest marketing platform in China.
That is to say, in the 2006&2009 semiconductor sales cycle, Tencent almost stepped on most of the “application cycle” of technological iterations, and won the leading share in many fields.
It can be seen that this reduction in the semiconductor process occurs every so often. It means “technological innovation (semiconductor/communication technology) – semiconductor sales – hardware sales – application realization.” It will be staged simultaneously.
And every round of excess returns of Tencent’s stock price also comes from this.
In other words, Tencent looks like a pig living in a “wind vent”.
However, it can be seen that in the first wave of application cycles, Tencent’s stock price has the highest excess return, and every time after that, the return is decreasing.
Note: The calculation of the rate of return here selects the lowest point and the highest point of the stock price within 18 months for comparison.
In this regard, many people think that “the bigger the volume, the more limited the growth space”. This explanation is too crude.
2. Diminishing marginal excess returns, multi-dimensional judgment space and odds
“You can never understand an Internet company from its financial statements.”
This is the conclusion Wu Xiaobo came to when he wrote “Tencent Biography” and looked through Tencent’s post-listing report to find information. But in fact, data trends are a relatively more realistic basis.
Data shows that in the past few decades, Tencent’s year-on-year growth rate of net profit from continuing operations and net profit margin from continuing operations have shown a significant downward trend.
Note: Here we only focus on the profits from Tencent’s core business, so we exclude non-sustainable net profits.
The acceleration of the company’s “gold absorption” is weakening, and the distribution to investors will naturally shrink – in addition to the price difference generated by the circulation of stock income, there are also the company’s dividends and bonuses.
But this will create new confusion for everyone: in several rounds of iterations, it is clear that mobile games attract more money than web games, and the information flow is more accurate than portal website advertisements. Why does the acceleration of making money become weaker?
This is too linear from the point of view of profit margins only. In fact, behind the decision of the odds is the market increment space for the new business growth ceiling, and the industry competition pattern that affects the company’s share are all factors that need to be considered.
Below, we analyze in detail:
The lens first cuts back to the 2009 excess revenue period. The data shows that as of 2009, Tencent’s game business contributed 59% to the overall revenue growth; its contribution to the overall gross profit reached 95% in 2009Q1.
Note: Since the net profit structure is not disclosed in detail, the gross profit margin is used here instead.
That said, the gaming business is the super cash cow at this stage. This is actually not difficult to understand.
In 2007, when I walked into an Internet cafe on a street corner, all I saw were the posters of “Orcs will never be slaves”;
But from 2009 to 2011, from Internet cafes to dormitories, nine out of ten people were playing “Legend”; urban white-collar workers and housewives were busy “stealing vegetables”.
This is explained by the fact that, compared to the end game, the page game is more casual, and the requirements for player operation and computer configuration are lower, and the penetration speed is very fast.
A large number of page game companies have risen from this. For example, Shanda was listed on the Nasdaq with “Legend”, and the 31-year-old founder Chen Tianqiao became the youngest richest man in China.
At the same time, the game industry chain has also undergone great changes. Browsers such as hao123 controlled the game entrance, gradually replaced publishers for intermodal transportation, and began to dominate the game industry chain and become a “profit center”.
Under the guidance of Ma Huateng’s “post-launch is the safest way”, Tencent not only won the victory of imitation by using QQ’s users and traffic – as of 2012, Tencent’s page games accounted for 50% of the industry scale.
It also received the most dividends. According to data, as of 2015H1, Tencent accounted for 33% of the combined transportation market.
In addition to game iteration, the trend of traffic precision iteration during this period is also obvious. As mentioned above, Tencent has gained more benefits than its peers.
In this way, the huge new market space, superimposed and grabbed a large piece of the cake, created a “sexy and attractive” excess return.
Such a path is repeated on WeChat in the mobile cycle.
When the number of WeChat users exceeded 30 million, Ma Huateng once said beyond doubt: “Because of WeChat, the Weibo war (Tencent Weibo and Sina Weibo) is over.”
In fact, not only Weibo, but WeChat has iterated almost all previous communications and intimate social interactions. Statistics show that by the end of 2016, WeChat users had reached 800 million, and the penetration rate was close to 70%.
In other words, the first round of online games and the second round of WeChat completely broke the original order, creating a huge market space for destructive innovation, and Tencent also ate the largest increase.
However, you may have found that around 2010, when mobile phones were able to chat QQ and swipe Weibo, people quickly abandoned computers; but now, people are questioning “4G mobile phones can already meet daily needs, why should we change to 5G mobile phones? ?”
This stems from disruptive innovation and is not normal. In fact, in the third round – the 3G to 4G technology cycle, a decreasing trend has been staged.
It can be seen that the application level begins to develop in a more diverse direction at this time:
However, most of the applications are only functional optimization, such as the content section, information distribution from information flow to information flow, killing time, is a structural innovation, ” stock iteration” that ‘s all.
Tencent has also made relevant layouts, and according to the 2017Q2 conference call: due to the substantial improvement of advertising positioning technology, the advertising price has been raised. In addition, ad inventory has also grown.
But overall, the revenue growth rate has shrunk, and the gross profit margin has not increased as much as in the 3G era.
And it really has the meaning of “incremental iteration” , such as short videos, live broadcasts, mobile games, etc. The first two had limited market growth at that time due to reasons such as communication speed and tariffs. Data shows that the user penetration rate of webcasting will not approach 70% until 2021.
In contrast, although mobile games broke out in the current period – after all, because you played LOL and your girlfriend who quarreled with you, all began to indulge in the Canyon of Kings, but Tencent’s competition was obviously under pressure.
In 2015, Tencent moved to the heavyweight mobile game market, and the games such as “Legend of Blood” and “New Swordsman Love” have become popular. However, NetEase’s “Fantasy Westward Journey” and “Dahua Westward Journey” during the same period were not less popular.
In 2017, Tencent finally launched “Honor of Kings” by itself, which became an instant hit, but NetEase’s “Onmyoji” has an influence that cannot be ignored.
In such a “goose and pig confrontation”, Tencent’s real share is far less than that of the online game era . As shown in the figure below, Tencent’s game revenue growth contribution declined during this stage.
Waiting for the fourth round of 4-5G stage, Tencent’s response to the big data cycle, that is, video streaming, algorithm recommendation, etc., is slow:
It gave up direct competition in the short video field very early and closed Weishi. By the time Douyin exploded and rejoined the fray, it was too late.
It can be seen that the most recent excess returns have little to do with business advancement. They are mainly short-term “capital games” such as epidemic catalysis and loose liquidity. Naturally, the flexibility is more limited, only more than doubled.
In general, if you want to get more excess returns, you have to “rely on the sky” and “man-made”.
However, after 2016, Tencent faced either insufficient market growth, or limited share of its own, diminished performance growth imagination, or missed opportunities. It is not difficult to understand that the marginal rate of return is diminishing.
3. The gap in market awareness was quickly filled, and the effective window period was shortened sharply
In fact, in addition to the marginal diminishing returns, there is also a law in Tencent’s previous stock price excess returns:
The PC cycle, from semiconductor innovation to Tencent’s stock price reaching a high point, has gone through 3 years; in the 3G era, this process was reduced to 1.5 years; in the 4G era, the time was further compressed to 2-3 quarters.
(In 2020, the stock price exceeds the return, which is mainly due to the macro environment, and will not be discussed here.)
That is to say, as time goes by, the time difference of stock pricing in each cycle becomes shorter and shorter . The preemption was serious, and the retail investors who entered the market later were only left to stand guard at high positions.
Behind this is the layer-by-layer compression of the entire conduction chain (technical innovation – semiconductor sales – hardware sales – application realization – stock price) .
At the China Mobile Partner Conference in 2018, OPPO executives showed a 5G prototype based on Find X, and said: “We are confident to be the first batch and strive to become the first terminal manufacturer to launch 5G commercial mobile phones.”
But in fact, at this time, the domestic 5G infrastructure is still in the conceptual stage.
On the other hand, in the 3G era, the license was issued in December 2008, and OPPO’s first 3G mobile phone, the E21W, was launched two years later.
The reason why “Buddha” has become “roll king” is to borrow the words of Counterpoint analysts: In the past, mobile phone sales were driven by marketing, but now they are driven by advanced technology and functions.
This is reflected in the data. It can be seen that in the 3G era, semiconductor sales peaked, and it took about two years to transmit to the terminal.
In the 4G cycle, this time difference has been shortened to one and a half years; the 5G period is only 1-2 quarters.
Remarks: The fluctuation of semiconductor and smartphone shipment growth will also be affected by other factors outside the cycle. Here, a general trend comparison is made.
Not only the conduction of semiconductors to hardware, but also the application side of the next ring .
At the end of 2000, the number of registered users of QQ was about to exceed an astonishing record of 100 million, but no one in China was willing to buy its shares. So much so that Ma Huateng said in a later interview: That time was the most painful.
But when it came to WeChat, when the number of users had just reached 30 million, Ma Huateng declared to the inside: “The war on Weibo is over”, and ordered the suspension of the upcoming 20 million yuan advertisement in Beijing and Shanghai.
This shows that the market’s cognitive paradigm on the application level is becoming clearer and clearer, and the pricing time difference is naturally shortening.
Based on this, when the next cycle comes, if the market can expect:
1. In the irreversible iterative trend, whether the company’s existing business has certain resistance;
2. Whether to release the signal to rush into the new business.
It means that excess returns can basically be obtained, and the market pricing efficiency will be further improved. This one corresponds to Tencent.
In the game business, when the mobile gameization eliminated a large number of online game companies, Tencent, on the one hand, based on QQ, has always grasped the traffic entrance and occupied a strong exposure position – even if the quality of the second-tier works is average, it can be released from the beginning. It sent it to the top of the bestseller list.
On the other hand, with a deep understanding of the “skin changing” skills, many popular online games such as “League of Legends” and “PUBG” have been successfully transformed into mobile games, and they have entered the game with “Glory of the King” and “Peace Elite”.
In addition to being resistant, Tencent’s response to capturing industry changes in this round was also timely.
When casual mobile games emerged in 2013, Tencent offered a “blade” — split and reorganized four studio groups of Tianmei, Photon, Rubik’s Cube, and Northern Lights. In 2015, when the 4G mobile phone replacement reached its climax, “Glory of the King” “National Super God” was launched immediately and became a phenomenal hit.
In terms of advertising business, the logic is similar:
Of course, there are risks in ecological delay. For the advertising business, when Facebook became mobile, along with the decline in page exposure, the loading rate of mobile ads did not open, which dragged down the growth rate of overall advertising revenue.
In fact, Tencent’s mobilization that year also experienced a situation of “fighting each other” – as the number of WeChat users increased, the growth rate of QQ users fell sharply.
However, its advertising revenue growth rate over the same period has not been affected.
The reason is that, at the same time as WeChat was developing, Tencent launched Guangdiantong based on the QQ series ecology (QQ space, QQ client, mobile QQ, etc.) advertising business.
In other words, the ecology cultivated in the previous cycle can be realized on a large scale in the next cycle. On the one hand, it solves the problem of green and yellow; on the other hand, it can also provide cash for new ecological investment.
Such cycles are repeated, and investors’ judgments on whether Tencent will take advantage of the wind will naturally become faster and faster.
Back to the present, a new cycle seems to have begun:
According to IC Insights statistics, the capital expenditure of the global semiconductor industry will reach $190.4 billion in 2022, a record high. Among them, the expansion of international leaders is mainly based on more advanced processes (such as 5nm).
At the same time, the global deployment of 5G is also accelerating. This makes the market look forward to the explosion of the metaverse and new energy vehicles.
In the metaverse, the hardware cycle is just around the corner. Among the leading companies, Meta’s Oculus Quest 2 will be launched in 2020; in 2023, Apple’s first AR/VR device is also expected to be launched.
As for Tencent’s existing ecosystem, how can it be applied to new energy vehicles and VR headsets on a large scale, and can it form a new generation for existing applications? The market is waiting for a signal.
summary
“In your opinion, who will become Tencent’s future enemy?”
In 2012, Ma Huateng asked Kevin Kelly, the founding editor-in-chief of Wired magazine, at the Tencent Club in Beijing.
In the ups and downs of more than 20 years, Tencent has responded quickly in key incremental markets by stepping on the cyclical outlet, and continued to eat fatty fish, so there has been no clear sign of the answer to this question.
However, in the era after 5G, the certainty that Tencent Ecology will continue to obtain excess returns begins to blur. The market inevitably raises the worry that the answer will eventually emerge.
As Kevin Kelly answered at the time: In the Internet world, the person who is about to destroy you will never appear on an established list.
This article comes from: inside and outside the table, author: Zhou Xiaohe Jinyi, editor: Fu Xiaoling Reno
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