Contrasting Tencent (OTCMKTS:TCEHY) & Reddit (NYSE:RDDT)

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

Profitability

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

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

Risk and Volatility

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

Insider and Institutional Ownership

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

Analyst Recommendations

This is a summary of recent ratings for Reddit and Tencent, as provided by MarketBeat.com.

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

Reddit presently has a consensus target price of $221.10, suggesting a potential upside of 40.34%. Tencent has a consensus target price of $106.00, suggesting a potential upside of 94.64%. Given Tencent’s higher probable upside, analysts plainly believe Tencent is more favorable than Reddit.

Earnings & Valuation

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

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

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.

Summary

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

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.

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.