Tencent Music Entertainment Ready To Benefit From 'Secular Tailwind Of Music Streaming Adoption': Analysts On Q4 Results, Outlook

Zinger Key Points
  • Tencent Music Entertainment expects to sustain annual music net adds of more than 15 million in 2024, one analyst says.
  • The company beat Street expectations on revenues and gross margins in Q4, driven by mix shift, another analyst notes.

Tencent Music Entertainment Group TME shares were climbing Wednesday after the company reported upbeat fourth-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the release.

Goldman Sachs On Tencent Music Entertainment

Analyst Lincoln Kong upgraded the rating from Neutral to Buy, while rating the price target from $11.20 to $14.00.

Tencent Music Entertainment is among the top performers “within our China Internet coverage” over the past six months, and could continue to outperform, Kong said in the upgrade note.

Kong said the company is likely to sustain annual music net adds of over 15 million in 2024 for the fifth consecutive year, beginning with net adds of 6 million in the first quarter, “on better paying propensity for music from increasing usage scenarios, limited competition, a history of higher tolerance to price hikes.”

Check out other analyst stock ratings.

Mizuho Securities On Tencent Music Entertainment

Analyst Wei Fang reiterated a Buy rating while bumping the price target from $12 to $13.

Tencent Music Entertainment’s core music revenues came in higher than consensus estimates, “driven by accelerated subscriptions in business and advertising,” Fang said. The company’s gross margins expanded by 260 basis points (bps) sequentially to 38.3% and came in 150bps higher than Street expectations, driven by the mix shift, Fang added.

“We believe the accelerated focus shift to core music growth is strategic and synergizes better with TME’s core expertise and assets,” the analyst further wrote.

Benchmark On Tencent Music Entertainment

Analyst Fawne Jiang reaffirmed a Buy rating while lifting the price target to $14.

Tencent Music Entertainment reported “strong” results for its fourth quarter, “with accelerated subscription growth underpinned by both paying users uptick and ARPPU expansion,” Jiang wrote in a note. “Management guided to a continued solid trend in FY1Q/FY24,” Jiang added.

“More importantly, with reset of social entertainment on top of robust music growth, TME has quickly transitioned into a pure online music play in China, a countercyclical category leader poised to reap the benefits of secular tailwind of music streaming adoption,” the analyst further stated.

TME Price Action: Shares of Tencent Music Entertainment had risen by 4.86% to $11.55 at the time of publication on Wednesday.

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Posted In: Analyst ColorAsiaEarningsEntertainmentLong IdeasNewsUpgradesPrice TargetReiterationGlobalMarketsAnalyst RatingsMoversTechTrading IdeasGeneralBenchmarkChinaExpert IdeasFawne JiangGoldman SachsLincoln KongMizuho SecuritiesMusicWei Fang
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