Tencent shares dropped by more than 5 percent on Tuesday — one day after a huge rally pushed its valuation to nearly US$1 trillion for the first time, CNBC's Arjun Kharpal writes.

Shares hit HK$767.5 on Monday, rallying by 11 percent at one point. That pushed the company’s market capitalization to HK$7.35 trillion (US$949 billion) on Monday.

Monday’s rally appeared to be propelled by bullish calls by two investment banks. In a research note, Citi raised its target price to HK$876 from HK$734, a 14 percent rise from Monday’s close.

UBS also upped its price target on Tencent from HK$700 to HK$830 — that’s a more than 8 percent rise from Monday’s close.

But investors took profit on Tuesday, driving Tencent shares lower by around 5.48 percent at HK$724.50 at 2:45 p.m. local time. The stock was down by over 6 percent earlier in the day but pared some losses.

Investors are waiting for Tencent’s 2020 results for the fourth quarter and full year, which will be released in March.

Analysts are expecting revenue to come in at 131.83 billion yuan (US$$20.36 billion) for the December quarter, a 24.6 percent year-on-year rise, according to Refinitiv estimates. Net income is expected to grow by nearly 29 percent to 32.85 billion yuan.

Tencent is known for its huge gaming business which analysts expect to have performed well in the fourth quarter. Revenue from smartphone games in particular are expected to grow by 46 percent year-on-year to 38 billion yuan, helped by new title releases, according to a recent note from Jefferies.

Other analysts have also backed that up.

“We expect solid results in upcoming fourth quarter of 2020, with strength in the game business overall,” Macquarie analyst Han Joon Kim said in a note published January 19.

But Tencent has also been growing other areas of its business including advertising, cloud computing and financial technology via its WeChat Pay mobile payment system.

WeChat, in particular, has been a focus of investors.

Last week, Tencent announced that transactions on its WeChat Mini Programs grew by more than 100 percent in 2020 from 800 billion yuan in 2019. The company did not reveal the 2020 figure. But it highlights the way that Tencent is trying to monetize and increase the stickiness of its messaging app WeChat, which is used by over a billion people.

Mini Programs are apps people can use within WeChat without having to leave the messaging app. They have been a key part of the growth of WeChat.

Though the monetization efforts of WeChat are still in the early stages, analysts see this as a long-term effort.

“We continue to find stronger emphasis on improving accessibility and functionality than monetization. We think lack of monetization of mini programs in 2021 is fine, as there is limited expectation of such embedded in earnings expectation anyways,” Macquarie’s Kim said.

“Rather, Tencent’s growing influence in on-line commerce activity will strengthen the stock’s long-term narrative and support its valuation multiple.”

Tencent drops from all-time high, investors take profit