Analyst Yang Liu CFA of Morgan Stanley maintained a Buy rating on Tencent Music Entertainment Group (TME – Research Report), with a price target of $16.50.
Confident Investing Starts Here:
- Quickly and easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
- Receive undervalued, market resilient stocks straight to you inbox with TipRanks' Smart Value Newsletter
Yang Liu CFA has given his Buy rating due to a combination of factors that highlight Tencent Music Entertainment Group’s strong growth potential. The company has successfully increased its Average Revenue Per Paying User (ARPPU) by 7.5% year-over-year, driven by strategic initiatives like higher SVIP penetration and reduced promotional activities. This focus on enhancing content differentiation rather than engaging in price competition is expected to contribute to a 10-11% annual ARPPU growth, supporting the company’s revenue targets.
Additionally, TME’s advertising segment is emerging as a significant revenue and margin driver, utilizing incentive-based ads to monetize its large non-paying user base. The company’s operating leverage is expected to improve due to the faster growth of high-margin businesses such as SVIP and advertising, along with effective cost management. Furthermore, strategic investments in companies like Spotify and Universal Music Group add value, justifying an increased price target of US$16.50. These factors collectively underscore the positive outlook for TME, supporting the Buy recommendation.
According to TipRanks, Liu CFA is a 5-star analyst with an average return of 32.9% and a 61.11% success rate. Liu CFA covers the Technology sector, focusing on stocks such as GDS Holdings, Kingdee International Software Group Co, and Tuya.
In another report released on May 11, J.P. Morgan also maintained a Buy rating on the stock with a $16.00 price target.