Critical Review: Tencent (OTCMKTS:TCEHY) versus Reddit (NYSE:RDDT)

Tencent (OTCMKTS:TCEHY) and Reddit (NYSE:RDDT) are both large-cap communication services companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, dividends, risk, institutional ownership, profitability, valuation and earnings.

Earnings and Valuation

This table compares Tencent and Reddit”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tencent	$104.58 billion	4.74	$31.28 billion	$3.65	14.92
Reddit	$2.20 billion	13.76	$529.72 million	$4.30	36.64

Tencent has higher revenue and earnings than Reddit. Tencent is trading at a lower price-to-earnings ratio than Reddit, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

0.0% of Tencent shares are owned by institutional investors. 28.5% of Reddit shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Tencent and Reddit, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tencent	1	1	2	0	2.25
Reddit	0	11	18	2	2.71

Tencent currently has a consensus price target of $106.00, indicating a potential upside of 94.64%. Reddit has a consensus price target of $221.10, indicating a potential upside of 40.34%. Given Tencent’s higher possible upside, research analysts clearly believe Tencent is more favorable than Reddit.

Risk and Volatility

Tencent has a beta of 0.26, meaning that its share price is 74% less volatile than the S&P 500. Comparatively, Reddit has a beta of 2.02, meaning that its share price is 102% more volatile than the S&P 500.

Profitability

This table compares Tencent and Reddit’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Tencent	29.83%	19.98%	12.03%
Reddit	31.35%	29.02%	26.32%

Summary

Reddit beats Tencent on 11 of the 15 factors compared between the two stocks.

About Tencent

Tencent Holdings Limited, an investment holding company, offers value-added services (VAS), online advertising, fintech, and business services in the People's Republic of China and internationally. It operates through VAS, Online Advertising, FinTech and Business Services, and Others segments. The company's consumers business provides communication and services, such as instant messaging and social network; digital content including online games, videos, live streaming, news, music, and literature; fintech services, which includes mobile payment, wealth management, loans, and securities trading; and various tools, such as network security management, browser, navigation, application management, email, etc. Its enterprise business comprises marketing solutions, which offers digital tools including user insight, creative management, placement strategy, and digital assets management; and cloud services, such as cloud computing, big data analytics, artificial intelligence, Internet of Things, security and other technologies for financial services, education, healthcare, retail, industry, transport, energy, and radio & television application. In addition, the company operates innovation business, which includes artificial intelligences; and discover and develops enterprise and next-generation technologies for food production, energy, and water management application. Tencent Holdings Limited was formerly known as Tencent (BVI) Limited and changed its name to Tencent Holding Limited in February 2004. The company was founded in 1998 and is headquartered in Shenzhen, the People's Republic of China.

About Reddit

Reddit, Inc. operates a website that organizes digital communities. It organizes communities based on specific interests that enable users to engage in conversations by sharing experiences, submitting links, uploading images and videos, and replying to one another. The company was founded in 2005 and is headquartered in San Francisco, California.