In major news on Hong Kong stocks, Tencent Music Entertainment Group (HK:1698) (NYSE:TME) gained 4.08% today after the company’s Q1 revenue exceeded analysts’ estimates, driven by higher paid subscriptions and advertising services. The company recorded revenue of ¥6.77 billion (about $937 million) in the first quarter, surpassing analysts’ projected revenue of ¥6.63 billion. However, revenue marked a year-over-year decline of 3.4%, dragged down by its social entertainment services.
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TME is China’s leading online music entertainment platform, providing services through popular mobile apps like QQ Music, Kugou Music, Kuwo Music, and WeSing. It operates as a subsidiary of the Chinese multinational technology conglomerate Tencent Holdings Limited (HK:0700) (TCEHY).
Tencent Music’s Q1 Earnings Roundup
Tencent Music’s Q1 performance was primarily driven by its music subscription business. Music subscription revenues amounted to ¥3.62 billion ($501 million), marking a 39.2% year-over-year increase. The paying user base grew by 20.2% year-over-year to reach 113.5 million. Additionally, there was a sequential increase of 6.8 million paying users, the largest quarterly net increase observed to date. Consequently, the overall revenues from online music services saw a robust year-over-year increase of 43% in Q1.
On the flip side, the revenue growth from music subscriptions was offset by the decline in social entertainment services. Revenue for this segment was down by 49.7% to ¥1.76 billion, mainly due to ongoing government regulations on online gambling and the growing competition in the sector.
Additionally, Tencent Music’s gross margin rose to 40.9% from 33.1% in the same period of 2023, mainly driven by robust revenue growth and the expansion of its own content. Meanwhile, the company’s net profit grew 27.5% year-over-year, while net profit attributable to equity holders increased 23.9%.
Is Tencent Music a Good Stock to Buy?
According to TipRanks’ rating consensus, 1698 stock has received a Moderate Buy rating, backed by two Buy recommendations. The Tencent Music share price forecast is HK$54.15, which is 2.75% above the current trading level.
