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Tencent Music Entertainment Group (TME)
NYSE:TME
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Tencent Music Entertainment Group
(NYSE:TME)
Rating:78Outperform
Price Target:
$19.00
▲(5.79%Upside)
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)
Market Cap
$25.87B
Dividend Yield0.97%
Average Volume (3M)6.29M
Price to Earnings (P/E)21.0
Beta (1Y)0.84
Revenue Growth4.59%
EPS Growth83.27%
CountryUS
Employees5,353
SectorCommunication Services
Sector Strength88
IndustryInternet Content & Information
Share Statistics
EPS (TTM)0.38
Shares Outstanding716,429,900
10 Day Avg. Volume5,622,173
30 Day Avg. Volume6,289,879
Financial Highlights & Ratios
PEG Ratio0.09
Price to Book (P/B)1.31
Price to Sales (P/S)0.00
P/FCF Ratio19.28
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$17.51Price Target Upside-2.51% Downside
Rating ConsensusStrong Buy
Number of Analyst Covering11
Tencent Music Entertainment Group Business Overview & Revenue Model
Company DescriptionTencent 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 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: 25.33%|
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
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.85
Very Positive
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.80
Positive
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.78
Positive
| 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 | EBIT |
| 11.59B | 8.71B | 6.06B | 4.44B | 2.75B | 4.71B | EBITDA |
| 11.41B | 8.23B | 7.17B | 5.65B | 4.75B | 5.55B | Net Income Common Stockholders |
| 9.51B | 6.64B | 4.92B | 3.68B | 3.03B | 4.16B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 26.69B | 27.21B | 23.54B | 20.88B | 20.43B | 26.02B | Total Assets |
| 98.08B | 90.44B | 75.54B | 67.01B | 67.25B | 68.27B | Total Debt |
| 6.08B | 6.05B | 6.05B | 5.96B | 5.36B | 5.50B | Net Debt |
| -5.95B | -7.11B | -7.52B | -3.59B | -1.23B | -5.63B | 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
Positive
17.96
Price Trends
14.74
Positive
13.59
Positive
12.41
Positive
Market Momentum
0.93
Positive
69.87
Neutral
85.05
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 17.96 is above the 20-day moving average (MA) of 16.83, above the 50-day MA of 14.74, and above the 200-day MA of 12.41, indicating a bullish trend. The MACD of 0.93 indicates Positive momentum. The RSI at 69.87 is Neutral, neither overbought nor oversold. The STOCH value of 85.05 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 1 New Risks
1.
The AI industry faces changing and extensive regulations. Integrating AI into our offerings could lead to potential infringement claims and higher costs for regulatory compliance. Q4, 2023
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 |
|---|---|---|---|---|---|---|---|
78 Outperform | $25.87B | 20.97 | 14.37% | 0.97% | 4.59% | 83.27% | |
76 Outperform | $143.01B | 115.09 | 24.28% | ― | 16.07% | ― | |
73 Outperform | $2.35B | 7.14 | 10.79% | 8.29% | 0.83% | 22.06% | |
68 Neutral | $30.01B | 8.51 | 9.85% | ― | -1.33% | 32.92% | |
61 Neutral | $14.59B | 5.85 | -4.31% | 3.69% | 2.76% | -30.36% | |
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
TME
Tencent Music Entertainment Group
17.96
3.89
27.65%
BIDU
Baidu
85.81
-9.67
-10.13%
JOYY
JOYY
48.00
19.87
70.64%
WB
Weibo
9.65
2.10
27.81%
SPOT
Spotify
712.26
403.26
130.50%
DOYU
DouYu International Holdings
6.92
5.08
276.09%
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.