Media and entertainment conglomerate Tencent is no longer one of the world’s 10 biggest companies thanks to China’s recent video game freeze, CNN reports.
No one knows how long the freeze will last, however, and that’s making investors nervous. Tencent shares promptly started falling after the government announced its plans, and the company reported lower net profit in the second fiscal quarter of the year, down 22% when compared to the first quarter. While its smartphone games revenue increased 19% in the second quarter year-on-year, that same revenue was also down 19% compared to the first quarter. Meanwhile, PC games revenue was also down 5% year-on-year, and down 8% compared to Q1 2018.
Analysts at investment bank Daiwa Capital say they expect Tencent to report a 20% drop in revenue from its mobile gaming business for the third fiscal quarter of 2018, which ended in September. But, they also said they believe the company has strong long-term growth prospects and recommend buying the stock at its current levels.