Tencent Music Entertainment Group (TME) AI Stock Analysis

• Market Cap: $35.66B
• Dividend Yield: 0.72%
• Average Volume (3M): 6.31M
• Price to Earnings (P/E): 27.4
• Beta (1Y): 0.81
• Revenue Growth: 10.66%
• EPS Growth: 84.89%
• Country: US
• Employees: 5,353
• Sector: Communication Services
• Sector Strength: 94
• Industry: Internet Content & Information
• EPS (TTM): 0.22
• Shares Outstanding: 716,429,900
• 10 Day Avg. Volume: 7,629,958
• 30 Day Avg. Volume: 6,313,291
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 0.79
• Enterprise Value/Revenue: 0.98
• Enterprise Value/Gross Profit: 2.27
• Enterprise Value/Ebitda: 2.47
• 1Y Price Target: $26.90
• Price Target Upside: 7.64% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 12

• Rating: 79 Outperform
• Price Target: $29.00 ▲(16.05% Upside)

Tencent Music Entertainment Group's strong financial performance and positive earnings call sentiment are the primary drivers of its high score. The technical analysis suggests bullish momentum, though caution is advised due to overbought signals. Valuation metrics indicate the stock may be overvalued, slightly tempering the overall score.

Positive Factors

Earnings

Total revenue grew by 18% YoY to RMB8.44bn, and non-IFRS net income was up by 37% YoY to RMB2.57bn, 6% and 13% ahead of Bloomberg consensus respectively, primarily attributable to the robust growth of non-subscription music revenue.

Strategic Partnerships

The platform continued to expand its content ecosystem through strategic partnerships with top Korean labels and leading Chinese artists, fueling growth in both domestic and cross-border music consumption.

User Engagement

The company delivered a robust performance in 2Q, supported by rising SVIP penetration, ARPPU uplift, and record-high user engagement.

Negative Factors

Competition

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

Profit Margins

The faster growth of lower-margin revenues from offline concert and fans economy tends to impact the overall gross profit margin trend.

Tencent Music Entertainment Group Business Overview & Revenue Model

Company Description

Tencent Music Entertainment Group (TME) is a leading online music entertainment platform in China, operating primarily through its flagship apps: QQ Music, Kugou, and Kuwo. The company offers a diverse range of services including music streaming, online karaoke, and social entertainment features. TME also engages in music publishing and provides a platform for independent artists to distribute their music, making it a comprehensive ecosystem for music lovers and creators alike.

How the Company Makes Money

Tencent Music generates revenue through a multi-faceted business model primarily focused on subscription services, digital music sales, and advertising. Its key revenue streams include: 1) Subscription Fees: TME offers premium subscription plans for users seeking an ad-free experience and additional features, contributing significantly to its revenue. 2) Digital Music Sales: The company sells digital albums and individual tracks, allowing users to purchase music directly. 3) Advertising: TME generates income from advertising by allowing brands to promote their products through its platforms, leveraging its vast user base. 4) Social Entertainment: The company includes social features, such as online karaoke, which attracts users and creates additional monetization opportunities. Additionally, TME has established partnerships with various music labels and artists, enhancing its content library and boosting user engagement, which further supports its revenue growth.

Tencent Music Entertainment Group Financial Statement Overview

Summary

Tencent Music Entertainment Group demonstrates strong financial performance with steady revenue growth, high profitability, and efficient cost management. The balance sheet is conservatively leveraged, and cash flow trends are positive, indicating robust operational efficiency and strategic financial management.

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	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	28.99B	28.40B	27.75B	28.34B	31.24B	29.15B
Gross Profit	12.50B	12.03B	9.79B	8.77B	9.40B	9.30B
EBITDA	11.47B	8.23B	7.17B	5.65B	4.75B	5.55B
Net Income	9.51B	6.64B	4.92B	3.68B	3.03B	4.16B
Balance Sheet
Total Assets	98.08B	90.44B	75.54B	67.01B	67.25B	68.27B
Cash, Cash Equivalents and Short-Term Investments	26.69B	27.21B	23.54B	20.88B	20.43B	26.02B
Total Debt	6.08B	6.05B	6.05B	5.96B	5.36B	5.50B
Total Liabilities	22.89B	20.72B	18.33B	17.88B	16.20B	15.54B
Stockholders Equity	73.24B	67.86B	55.91B	48.10B	50.32B	52.24B
Cash Flow
Free Cash Flow	10.11B	9.24B	6.17B	6.43B	2.48B	4.38B
Operating Cash Flow	10.11B	10.28B	7.34B	7.48B	5.24B	4.88B
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	-3.71B	5.29B

Tencent Music Entertainment Group Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 24.99
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• 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 24.99 is above the 20-day moving average (MA) of 23.29, above the 50-day MA of 21.25, and above the 200-day MA of 15.07, indicating a bullish trend. The MACD of 1.31 indicates Negative momentum. The RSI at 74.16 is Negative, neither overbought nor oversold. The STOCH value of 61.89 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
TME	79 Outperform	$35.66B	27.38	14.07%	0.72%	10.66%	84.89%
BIDU	75 Outperform	$31.57B	8.08	10.33%	―	-1.32%	42.56%
SPOT	74 Outperform	$145.82B	166.04	13.94%	―	15.52%	67.15%
WB	71 Outperform	$2.90B	7.94	10.77%	7.14%	1.49%	14.94%
Sector *	60 Neutral	$42.44B	3.87	-13.01%	4.03%	1.90%	-42.25%
JOYY	56 Neutral	$2.56B	―	-2.48%	3.60%	-3.61%	-143.37%
DOYU	55 Neutral	$245.35M	―	-4.77%	―	-10.98%	-71.11%