Maintaining Buy on Tencent Music: Long-Term Growth, Strategic Investments, and Attractive Upside Despite Near-Term Margin Pressure

Analyst Yang Liu CFA of Morgan Stanley maintained a Buy rating on Tencent Music Entertainment Group, reducing the price target to $25.00.

Yang Liu CFA has given his Buy rating due to a combination of factors including a constructive long‑term outlook on Tencent Music Entertainment Group’s core music operations and a still-attractive valuation versus his revised target price. While he modestly trims adjusted operating profit and EPADS forecasts for 2025–2027 to reflect heavier spending on new initiatives and the lower-margin nature of concerts and merchandise, he still expects revenue to grow steadily, particularly in the music segment. His analysis suggests that these investments, although dilutive to margins in the near term, are important for strengthening TME’s competitive position and unlocking new revenue streams over time.
Yang Liu CFA’s probability‑weighted target price is set at US$25, implying meaningful upside from the prevailing share price at the time of the report, even after a 9% downward revision to account for updated assumptions. The base‑case valuation of US$23 remains intact, the bear‑case is slightly raised due to an updated DCF horizon, and the bull‑case is adjusted lower to reflect a more conservative earnings multiple amid remaining uncertainty around the Ximalaya transaction. Overall, the risk‑reward profile, supported by resilient fundamentals and upside to the target price, underpins his decision to maintain a Buy recommendation.