Tencent Music: Buy Rating on Pullback Driven by Policy Misperception and Unpriced Growth Catalysts

Analyst Yang Liu CFA from Morgan Stanley maintained a Buy rating on Tencent Music Entertainment Group and keeping the price target at $25.00.

Yang Liu CFA has given his Buy rating due to a combination of factors that highlight both undervaluation and underappreciated catalysts for Tencent Music Entertainment Group. He notes that the recent share price weakness, particularly the decline following the South Korean president’s visit to China, stems largely from market disappointment over the lack of a formal easing announcement on K-pop live performances, rather than any deterioration in company fundamentals. In his view, the official language from Chinese authorities about promoting “orderly” cultural exchanges between China and South Korea signals a strong likelihood that restrictions on K-pop events will be relaxed in the foreseeable future. As a result, he believes the recent pullback is not justified, especially given that TME’s stock did not enjoy the speculative run-up that Korean entertainment names did ahead of the visit.
At the same time, Yang Liu CFA underscores that the current valuation—around 17x his 2026 earnings forecast—does not incorporate potential upside from strategic initiatives such as the proposed acquisition of Ximalaya or from incremental revenue associated with K-pop live entertainment once restrictions ease. He argues that these prospective drivers are not adequately reflected in consensus expectations or in the current share price, creating a favorable risk‑reward profile. With a substantial implied upside to his price target and multiple unpriced growth catalysts, he sees the current level as an attractive entry point for investors. Consequently, these factors collectively support his Buy recommendation on TME.