Naspers falls slightly from record high
But analysts believe there might still be upward potential for the internet and media company
Naspers’s share price retreated marginally in choppy trade on Wednesday after closing at a record high of R2,689.70 on Tuesday.
The internet and media company’s share price initially rose to as much as R2,714 in early morning trade on Wednesday, before retreating slightly to close at R2,680.77. The share has gained 33% so far in 2017.
Despite the share trading at a hefty price:earnings ratio of 97, analysts believe there might still be upward potential.
IG SA senior analyst Shaun Murison said the average target of analysts before Tuesday’s spike was at R2,990.57. "This has now increased to R3,015," said Murison.
Many local asset managers have media conglomerate Naspers as their primary local investment at present. Its market capitalisation is R1.143-trillion, the third largest on the JSE. Momentum SP Reid analysts said that Naspers was exceptionally overbought.
"Short-term traders should use the current strength in the counter to book all short-term trading profits which have occurred in recent weeks, as an opportunity to re-engage the share as lower levels will emerge in the weeks ahead," Momentum said.
Naspers’s latest movement comes after a sharp rise in the share price of its Chinese Tencent investment, of which it owns 34%. Tencent remains the main driver of Naspers’s earnings, despite extensive efforts over the past few years by management to diversify earnings.
The share is viewed favourably by foreign investors, with the Wall Street Journal recently punting Naspers as the best entry point into the South African market.
Vestact analysts have been persistent supporters of Naspers, saying Tencent’s strong numbers justify exposure to the stock.
Commenting after Tencent’s fourth-quarter results to March, Vestact analysts said South African investors were lucky "that through Naspers they can own a business such as Tencent".
The Vestact analysts said Tencent had been able to evolve into a more recognisable and diverse business, priced at the right level.
"We still accumulate Naspers on the basis that it trades at a pretty significant discount to the sum of the parts," they said.