Morgan Stanley has increased its price target for Tencent Music (TME, Financial) from $14.70 to $16.50 while maintaining an Overweight rating. The firm highlights a stable positive growth outlook as a key reason for the adjustment. Tencent Music's strategy to balance the scale of paying users with an increase in average revenue per paying user (ARPPU) contributed to its performance in the first quarter of 2025. The company's effective efforts in promoting SVIP services and reducing holiday promotions further supported this growth. Morgan Stanley expresses confidence that ARPPU will continue to significantly drive Tencent Music’s revenue.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 28 analysts, the average target price for Tencent Music Entertainment Group (TME, Financial) is $16.26 with a high estimate of $19.19 and a low estimate of $12.06. The average target implies an upside of 10.05% from the current price of $14.77. More detailed estimate data can be found on the Tencent Music Entertainment Group (TME) Forecast page.
Based on the consensus recommendation from 29 brokerage firms, Tencent Music Entertainment Group's (TME, Financial) average brokerage recommendation is currently 1.8, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Tencent Music Entertainment Group (TME, Financial) in one year is $8.74, suggesting a downside of 40.83% from the current price of $14.77. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Tencent Music Entertainment Group (TME) Summary page.
TME Key Business Developments
Release Date: March 18, 2025
- Total Revenue: RMB7.5 billion, up 8% year over year.
- Online Music Revenue: RMB5.8 billion, increased by 16% year over year.
- Music Subscription Revenue: RMB4 billion, up 18% year over year.
- Net Profit: RMB2.08 billion, increased by 47% year over year.
- Non-IFRS Net Profit: RMB2.4 billion, up 43% year over year.
- Gross Margin: 43.6%, an increase of 5.3 percentage points year over year.
- Online Music Paying Users: 121 million, a 13% increase year over year.
- Monthly ARPU: RMB11.1, compared to RMB10.7 in the same period last year.
- Social Entertainment Revenue: RMB1.6 billion, down 13% year over year.
- Cash and Cash Equivalents: RMB37.6 billion as of December 31, 2024.
- Annual Dividend: USD273 million announced.
- Share Repurchase Program: New program up to USD1 billion announced.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tencent Music Entertainment Group (TME, Financial) reported an 8% year-over-year growth in total revenues for Q4 2024, driven by strong performance in music subscription and advertising businesses.
- The company achieved a record high quarterly net profit, with a 47% year-over-year increase to RMB2.08 billion.
- TME's online music revenues increased by 16% year-over-year, supported by a robust growth in music subscriptions and advertising revenues.
- The company announced a new and expanded share repurchase program of up to USD1 billion, reflecting confidence in future growth prospects.
- TME's SVIP membership program saw strong sequential growth, enhancing user engagement and average revenue per paying user (ARPPU).
Negative Points
- Social entertainment services and other revenues declined by 13% year-over-year, indicating challenges in this segment.
- Despite the overall revenue growth, the social entertainment segment continues to face downward pressure due to market changes.
- The company faces potential competition in the market, which could impact subscriber growth and ARPPU.
- There is a need for continuous investment in AI and technology to maintain competitive advantage, which could increase operational costs.
- The company acknowledges the price sensitivity of subscribers, which may limit aggressive pricing strategies for short-term growth.
