CFRA Analyst Raises Tencent Music Price Target to $17 Amid Strong Growth

Tencent Music Entertainment Group (TME) has reported a strong first-quarter performance, driven by a 28% increase in profits to $212 million, primarily due to robust growth in its online music services, with 113.5 million paying subscribers as of March. The company's success has significant implications for the global music industry, as it demonstrates the increasing importance of digital music services in the world's largest market." This description focuses on the primary topic of TME's strong quarterly performance, the main entity of Tencent Music Entertainment Group, and the context of the global music industry. It highlights the significant actions of revenue growth and paying subscribers, as well as the implications for the music industry. The description also provides objective and relevant details that will help an AI generate an accurate visual representation of the article's content, such as a graph showing revenue growth or an image of a music streaming platform.

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CFRA Analyst Raises Tencent Music Price Target to $17 Amid Strong Growth

CFRA Analyst Raises Tencent Music Price Target to $17 Amid Strong Growth

CFRA analyst Ahmad Halim has raised the price target for Tencent Music Entertainment Group (TME) to $17.00 from $13.00, citing the company's earnings beat and robust growth in its Online Music Services business. The upward revision comes on the heels of TME's impressive first-quarter performance, which surpassed expectations.

Why this matters: The growth of Tencent Music Entertainment Group's online music business has significant implications for the global music industry, as it demonstrates the increasing importance of digital music services in the world's largest market. This trend is likely to influence the strategies of music companies and artists worldwide, as they adapt to the shift towards online music consumption.

Tencent Music reported a 28% increase in first-quarter profits to CNY1.53 billion ($212 million), driven by strong growth in music subscription revenues. The company now generates over $500 million in music subscription revenues per quarter, with 113.5 million paying subscribers as of March. Revenue from music subscriptions increased by approximately 40% to CNY3.62 billion ($501 million).

Despite the strong performance in online music, TME's overall revenues decreased by 3.4% compared to the preceding year, reaching CNY6.77 billion ($937 million). This decline was primarily attributed to a nearly 50% fall in revenue from social entertainment services to CNY1.76 billion ($244 million), following the termination of a popular live-streaming service. Monthly active users also decreased by 28% to 97 million in the initial quarter of 2024 compared to the previous year.

Halim expects the momentum in online music revenue growth to continue, aided by product innovations and effective monetization strategies. The analyst also anticipates gross profit margin expansion and the company's proactive measures to enhance shareholder value, such as share buybacks and the initiation of a dividend payout.

Other analysts have also maintained a positive outlook on Tencent Music. Saiyi HE from CMB International Securities maintained a Buy rating on TME with a price target of $16.00, citing similar factors. Benchmark Co. has also maintained a Buy rating on the stock with a $19.00 price target.

Technical analysis of TME's stock price on the weekly chart shows bullish impulsive pressure after forming a valid bottom at the 2.94 level. A bullish crossover between the dynamic 50 and 100 Moving Average lines suggests a bullish continuation signal. The ongoing buying pressure remains solid above the 10.00 psychological line, which might extend the upward pressure towards the 24.00 level.

Tencent Music Entertainment Group, a China-based online music entertainment platform and subsidiary of Tencent Holdings Limited, continues to demonstrate resilience and growth potential in its core online music business. With effective cost control measures, robust cash generation, and a focus on enhancing shareholder value, TME remains well-positioned to capitalize on the growing demand for digital music services in the world's largest market.

Key Takeaways

  • CFRA analyst raises Tencent Music's price target to $17.00 from $13.00.
  • Tencent Music's online music revenue grows 40% to $501 million.
  • The company has 113.5 million paying subscribers as of March.
  • Analysts expect continued growth in online music revenue and gross margin expansion.
  • Tencent Music's stock price shows bullish impulsive pressure, targeting $24.00.