Tencent's Margins Are Going Down, and That's Great News for Shareholders
Shares of Chinese internet giant Tencent (OTC: TCEHY) traded down after it reported its first-quarter numbers last week. Although results were strong, with revenue up 25% and net profit up 22% by non-International Financial Reporting Standards, investors wary of China's recent anti-monopoly crackdown probably needed a bigger beat to assuage those fears.
In addition, Tencent's management forecast heavy stepped-up spending this year, which means the company's margins will edge down and profit growth will be somewhere between zero and that 22% seen last quarter, according to management.
However, instead of fearing this scenario for the highly profitable Tencent, shareholders should be celebrating the news.
Source Fool.com
