Why Tencent Holdings Stock Fell 10.7% Today

MarketsMotley Fool

What happened

Shares of Chinese social-media and online services specialist Tencent Holdings (NASDAQOTH: TCEHY) fell as much as 10.9% on Wednesday, following the release of merely in-line fourth-quarter results.

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So what

Tencent's fourth-quarter sales rose 56% year over year, landing at $10.2 billion. On the bottom line, adjusted earnings increased by 42% to $2.67 billion. Both figures stopped near the analyst consensus. For extreme-growth stocks like Tencent, it's not always good enough to hit the expected targets -- these tickers are often judged by how large their earnings surprises are.

Now what

The company showed impressive growth across key markets such as online games, streaming video subscriptions, internet-based payment services, and digital advertising. Don't let today's market reaction fool you: Tencent is going places, and fast.

Don't cry for Tencent investors. Coming into this report, share prices had doubled over the previous 52 weeks. After Thursday's haircut, the stock still sports an impressive 77% one-year return and 686% over the last five years. Again, this is a classic case of overheated growth expectations that even a strong report couldn't quite live up to.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tencent Holdings. The Motley Fool has a disclosure policy.