Tencent Music Entertainment Group (TME) AI Stock Analysis

• Market Cap: $30.43B
• Dividend Yield: 0.83%
• Average Volume (3M): 5.87M
• Price to Earnings (P/E): 25.2
• Beta (1Y): 0.82
• Revenue Growth: 4.59%
• EPS Growth: 83.27%
• Country: US
• Employees: 5,353
• Sector: Communication Services
• Sector Strength: 70
• Industry: Internet Content & Information
• EPS (TTM): 0.39
• Shares Outstanding: 716,429,900
• 10 Day Avg. Volume: 6,151,194
• 30 Day Avg. Volume: 5,867,245
• PEG Ratio: 0.57
• Price to Book (P/B): 3.21
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 25.24
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $19.25
• Price Target Upside: -11.49% Downside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 11

• Rating: 72 Outperform
• Price Target: $22.50 ▲(3.45%Upside)

Tencent Music Entertainment Group has a strong financial foundation and robust growth in its core music business, reflected in its high financial performance score. Technical indicators suggest overbought conditions, which could lead to a short-term pullback. The valuation appears high, which may limit upside potential. The earnings call was positive but highlighted challenges in non-music segments. Overall, the stock is positioned well financially but may face short-term technical and valuation pressures.

Positive Factors

Earnings

TME reported 4Q results with robust earnings growth (+45% y/y) as structural drivers for margin expansion continued to play out on top of their disciplined expenses management.

Revenue Growth

Total revenue came in at RMB7.5B (+8.2% y/y), above consensus expectation of RMB7.2B, with online music services growing robustly at 16.1% y/y.

Shareholder Returns

The company has substantially stepped-up shareholder returns, including a $273M cash dividend for FY24 and a new $1B share repurchase program.

Negative Factors

Competition

Rising competition, particularly from lower-priced offerings, may slow new subscriber growth, especially among price-sensitive users.

Social Entertainment Revenue

Social entertainment revenue decreased by 12% YoY, mainly due to the decline in live streaming revenue.

Subscriber Growth Outlook

Intensifying competition from lower-priced offerings has led to a lower net subscriber addition forecast, indicating a softer subscription growth outlook.

Tencent Music Entertainment Group Business Overview & Revenue Model

Company Description

Tencent Music Entertainment Group operates online music entertainment platforms to provide music streaming, online karaoke, and live streaming services in the People's Republic of China. It offers QQ Music, Kugou Music, and Kuwo Music that enable users to discover and listen to music in personalized ways; and WeSing, which enables users to have fun by singing and interacting with friends, sharing their singing performances with friends, and discovering songs that others have sung. The company also operates Kugou Music, Kuwo Music, WeSing, QQ Music, Kugou Live, and Kuwo Live that provides an interactive online stage for performers and users to showcase their talent and engage with those interested in their performance; and Kuwo Changting, an audio platform that offers users various audio content, including audio books, cross-talks, radio dramas, and other entertainment. In addition, it sells music-related merchandise, including Kugou headsets, smart speakers, WeSing karaoke microphones, and Hi-Fi systems; and offers online music event ticketing services, as well as services to smart device and automobile makers to build and operate music services on devices and vehicles. Tencent Music Entertainment Group has a strategic partnership with China Literature. The company is headquartered in Shenzhen, China. Tencent Music Entertainment Group is a subsidiary of Tencent Holdings Limited.

How the Company Makes Money

Tencent Music Entertainment Group generates revenue primarily through its two main business segments: online music services and social entertainment services. The online music services segment includes subscriptions, digital music sales, and advertising, where users pay for premium memberships to access high-quality music, download songs, and enjoy an ad-free experience. The social entertainment services segment, which is a significant revenue driver, includes virtual gifts and premium memberships, particularly within its online karaoke and live streaming platforms. Users purchase virtual items to interact with performers, enhance their experience, and show support. Additionally, TME benefits from its strategic partnerships with record labels and music rights holders, which ensure a vast library of licensed music content. These partnerships are crucial in maintaining a competitive edge in content offerings and user engagement.

Tencent Music Entertainment Group Financial Statement Overview

Summary

Tencent Music Entertainment Group demonstrates strong financial performance with high profitability and efficient cost management. The company shows steady revenue growth and maintains strong margins. Its balance sheet is conservatively leveraged, indicating financial stability and resilience. Positive cash flow trends underscore robust operational efficiency.

Income Statement

Tencent Music Entertainment Group exhibits strong financial health with increasing revenue and profitability. The TTM (Trailing-Twelve-Months) Gross Profit Margin stands at 43.12%, and the Net Profit Margin is 32.82%, indicating efficient cost management and solid profitability. Revenue growth has been moderate, with a recent increase of 2.07% from the previous annual report, showcasing steady expansion. EBIT and EBITDA margins are robust at 39.97% and 39.36% respectively, reflecting strong operational performance.

Balance Sheet

The balance sheet is strong, with a low Debt-to-Equity Ratio of 0.08, indicating low leverage and a conservative financial structure. Return on Equity (ROE) is impressive at 12.99% for the TTM, demonstrating effective utilization of shareholder funds. The Equity Ratio is high at 74.67%, suggesting a solid asset base funded by equity. The company maintains a healthy liquidity position with significant cash reserves.

Cash Flow

Cash flow analysis shows a positive trend, with Free Cash Flow growing by 9.36% in the latest period. The Operating Cash Flow to Net Income ratio is 1.06, indicating efficient cash generation relative to profit. Free Cash Flow to Net Income ratio is strong at 1.06, highlighting effective cash management. The company has maintained steady cash flow growth, supporting its operational and strategic objectives.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	28.40B	27.75B	28.34B	31.24B	29.15B
Gross Profit	12.03B	9.79B	8.77B	9.40B	9.30B
EBITDA	8.23B	7.17B	5.65B	4.75B	5.55B
Net Income	6.64B	4.92B	3.68B	3.03B	4.16B
Balance Sheet
Total Assets	90.44B	75.54B	67.01B	67.25B	68.27B
Cash, Cash Equivalents and Short-Term Investments	27.21B	23.54B	20.88B	20.43B	26.02B
Total Debt	6.05B	6.05B	5.96B	5.36B	5.50B
Total Liabilities	20.72B	18.33B	17.88B	16.20B	15.54B
Stockholders Equity	67.86B	55.91B	48.10B	50.32B	52.24B
Cash Flow
Free Cash Flow	9.24B	6.17B	6.43B	2.48B	4.38B
Operating Cash Flow	10.28B	7.34B	7.48B	5.24B	4.88B
Investing Cash Flow	-6.82B	-1.86B	-1.45B	-6.00B	-14.21B
Financing Cash Flow	-3.83B	-1.54B	-3.42B	-3.71B	5.29B

Tencent Music Entertainment Group Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 21.75
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TME, the sentiment is Positive. The current price of 21.75 is above the 20-day moving average (MA) of 20.78, above the 50-day MA of 19.11, and above the 200-day MA of 14.01, indicating a bullish trend. The MACD of 0.81 indicates Positive momentum. The RSI at 66.57 is Neutral, neither overbought nor oversold. The STOCH value of 42.07 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TME.

Tencent Music Entertainment Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
WB	75 Outperform	$2.50B	7.53	10.79%	8.03%	0.83%	22.06%
BIDU	74 Outperform	$31.78B	8.86	9.85%	―	-1.33%	32.92%
TME	72 Outperform	$30.43B	25.22	14.37%	0.83%	4.59%	83.27%
SPOT	67 Neutral	$140.75B	113.27	24.28%	―	16.07%	―
JOYY	64 Neutral	$2.62B	―	-2.48%	3.70%	-3.61%	-143.37%
Sector *	56 Neutral	HK$68.54B	-1.70	-3.62%	5.51%	-4.09%	-17.08%
DOYU	55 Neutral	$275.53M	―	-6.76%	―	-18.43%	-349.12%