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Tencent Music Entertainment Group (TME)
NYSE:TME

Tencent Music Entertainment Group (TME) AI Stock Analysis

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TM

Tencent Music Entertainment Group

(NYSE:TME)

Rating:76Outperform
Price Target:
$21.00
▲(13.45%Upside)
Tencent Music Entertainment Group's overall score is driven by solid financial performance, strong technical indicators, and positive earnings call outcomes. While the stock shows bullish momentum, the high RSI indicates potential overvaluation, balancing the otherwise strong financial and operational performance.
Positive Factors
Earnings Growth
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.
Financial Performance
TME delivered a clean quarter with both revenue and margins above expectations.
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.
Subscription Growth
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 (TME) vs. SPDR S&P 500 ETF (SPY)

Tencent Music Entertainment Group Business Overview & Revenue Model

Company DescriptionTencent Music Entertainment Group (TME) is a leading online music entertainment platform in China, operating some of the most popular music applications in the country, including QQ Music, Kugou Music, and Kuwo Music. TME provides a wide range of services, including online music streaming, live music performances, karaoke, and social entertainment experiences, catering to a vast audience with diverse musical tastes. The company leverages its comprehensive content library, user-friendly interfaces, and innovative technology to deliver engaging and personalized experiences to music enthusiasts.
How the Company Makes MoneyTencent Music Entertainment Group primarily generates revenue through two main segments: online music services and social entertainment services. The online music services segment earns money from paid subscriptions, where users pay for premium features such as high-quality streaming, offline downloads, and exclusive content. It also includes digital album sales and partnerships with music labels for licensing and distribution. The social entertainment services segment, which includes platforms like WeSing, generates revenue through virtual gifts and premium memberships, where users purchase virtual items to use within the apps or during live streaming performances. Additionally, TME has monetization partnerships with brands and advertisers, leveraging its large user base for targeted advertising and promotional campaigns.

Tencent Music Entertainment Group Earnings Call Summary

Earnings Call Date:May 13, 2025
(Q1-2025)
|
% Change Since: 29.17%|
Next Earnings Date:Aug 18, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance in the music business, driven by subscription growth and strategic partnerships, but also noted challenges in the social entertainment segment and non-music subscriber monetization.
Q1-2025 Updates
Positive Updates
Strong Topline Growth
Tencent Music Entertainment Group reported robust topline growth in Q1 2025 with revenues reaching RMB 7.4 billion, a 9% year-over-year increase.
Significant Increase in Music Subscription Revenues
Music subscription revenues increased by 17% year-over-year to RMB 4.2 billion, driven by the expansion of the SVIP membership program and reduced promotional activity.
Gross Margin Improvement
Gross margin improved to 44.1%, an increase of 3.2 percentage points year-over-year, supported by the growth of subscription and advertising revenues.
Partnerships and Content Expansion
The company renewed multiyear contracts with Sony Music Entertainment and expanded collaborations with other labels, enhancing their music library and user experience.
Increased Net Profit
Non-IFRS net profit increased by 23% to RMB 2.2 billion, highlighting effective monetization and improved operating efficiency.
SVIP Membership Growth
SVIP membership penetration and ARPPU demonstrated strong growth momentum, contributing significantly to overall ARPPU expansion.
Negative Updates
Decline in Social Entertainment Revenues
Social entertainment services and other revenues declined 12% year-over-year to RMB 1.6 billion as the company shifted focus to its core music business.
Challenges in Non-Music Subscriber Monetization
The company faces challenges in converting nonpaying users to subscribers, relying heavily on advertising and other monetization strategies for this group.
Company Guidance
During Tencent Music Entertainment Group's First Quarter 2025 Earnings Conference Call, the company highlighted several key metrics and strategic initiatives contributing to their robust performance and future growth prospects. In Q1 2025, revenues reached RMB 7.4 billion, marking a 9% year-over-year increase. Online music revenues grew by 16% to RMB 5.8 billion, driven by a 17% year-over-year rise in music subscription revenues to RMB 4.2 billion. Monthly ARPPU increased to RMB 11.4, up from RMB 10.6 in Q1 2024. The company also saw strong growth in advertising revenues, particularly from innovative ad-supported models, and a 23% rise in non-IFRS net profit to RMB 2.2 billion. Furthermore, Tencent Music's SVIP membership program, premium sound offerings, and strategic partnerships with record labels contributed to increased user engagement and ARPPU expansion. Looking ahead, the company plans to focus on high-quality growth, leveraging its dynamic music ecosystem, and expanding its advertising business and SVIP memberships to drive sustainable growth in 2025.

Tencent Music Entertainment Group Financial Statement Overview

Summary
Tencent Music Entertainment Group demonstrates strong financial performance with high profitability and efficient cost management. Revenue growth is steady, and the balance sheet is conservatively leveraged with a low Debt-to-Equity Ratio. Cash flows are positive and growing, highlighting robust operational efficiency and financial stability.
Income Statement
85
Very Positive
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
80
Positive
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
78
Positive
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
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
28.99B28.40B27.75B28.34B31.24B29.15B
Gross Profit
12.50B12.03B9.79B8.77B9.40B9.30B
EBIT
11.59B8.71B6.06B4.44B2.75B4.71B
EBITDA
11.41B8.23B7.17B5.65B4.75B5.55B
Net Income Common Stockholders
9.51B6.64B4.92B3.68B3.03B4.16B
Balance SheetCash, Cash Equivalents and Short-Term Investments
26.69B27.21B23.54B20.88B20.43B26.02B
Total Assets
98.08B90.44B75.54B67.01B67.25B68.27B
Total Debt
6.08B6.05B6.05B5.96B5.36B5.50B
Net Debt
-5.95B-7.11B-7.52B-3.59B-1.23B-5.63B
Total Liabilities
22.89B20.72B18.33B17.88B16.20B15.54B
Stockholders Equity
73.24B67.86B55.91B48.10B50.32B52.24B
Cash FlowFree Cash Flow
10.11B9.24B6.17B6.43B2.48B4.38B
Operating Cash Flow
10.11B10.28B7.34B7.48B5.24B4.88B
Investing Cash Flow
-4.54B-6.82B-1.86B-1.45B-6.00B-14.21B
Financing Cash Flow
-3.76B-3.83B-1.54B-3.42B-3.71B5.29B

Tencent Music Entertainment Group Technical Analysis

Technical Analysis Sentiment
Positive
Last Price18.51
Price Trends
50DMA
14.82
Positive
100DMA
13.67
Positive
200DMA
12.45
Positive
Market Momentum
MACD
0.95
Positive
RSI
73.42
Negative
STOCH
88.04
Negative
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 18.51 is above the 20-day moving average (MA) of 17.05, above the 50-day MA of 14.82, and above the 200-day MA of 12.45, indicating a bullish trend. The MACD of 0.95 indicates Positive momentum. The RSI at 73.42 is Negative, neither overbought nor oversold. The STOCH value of 88.04 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TME.

Tencent Music Entertainment Group Risk Analysis

Tencent Music Entertainment Group disclosed 101 risk factors in its most recent earnings report. Tencent Music Entertainment Group reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Tencent Music Entertainment Group Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TMTME
76
Outperform
$25.86B20.9714.37%0.97%4.59%83.27%
76
Outperform
$143.01B115.0924.28%16.07%
WBWB
73
Outperform
$2.35B7.1410.79%8.29%0.83%22.06%
71
Outperform
$29.88B8.519.85%-1.33%32.92%
61
Neutral
$14.60B5.88-4.32%3.68%2.75%-30.55%
55
Neutral
$2.49B-2.48%1.93%-1.33%-148.56%
49
Neutral
$208.84M-6.76%-24.10%-953.50%
* Communication Services Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TME
Tencent Music Entertainment Group
18.51
4.33
30.54%
BIDU
Baidu
88.66
-5.28
-5.62%
JOYY
JOYY
48.84
21.13
76.25%
WB
Weibo
9.79
2.30
30.71%
SPOT
Spotify
699.11
389.11
125.52%
DOYU
DouYu International Holdings
6.75
4.94
272.93%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.