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Tencent Music Entertainment (TME)
:TME
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Tencent Music Entertainment Group
(NYSE:TME)
80Outperform
Positive Factors
Earnings
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.
User Experience
User retention and time-spent have set record highs, indicating differentiated user experiences from its content and platform.
Negative Factors
ARPPU Challenges
TME continues to raise ARPPU through unwinding discounts for green diamonds and higher-ARPPU membership plans, which will gradually take the baton to drive ARPPU growth.
Social Entertainment
Social entertainment declined 13.0% y/y, pressured on both paying users (-3.8% y/y) and ARPPU (-9.7% y/y).
Tencent Music Entertainment Group (TME) vs. S&P 500 (SPY)
Market Cap
$23.15B
Dividend Yield1.02%
Average Volume (3M)8.92M
Price to Earnings (P/E)21.6
Beta (1Y)0.84
Revenue Growth0.63%
EPS Growth34.09%
CountryUS
Employees5,185
SectorCommunication Services
Sector Strength73
IndustryInternet Content & Information
Share Statistics
EPS (TTM)0.60
Shares Outstanding883,602,500
10 Day Avg. Volume5,855,113
30 Day Avg. Volume8,915,073
Financial Highlights & Ratios
PEG Ratio0.64
Price to Book (P/B)N/A
Price to Sales (P/S)6.29
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$16.44Price Target Upside26.85% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering9
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 Financial Statement Overview
Summary
Tencent Music Entertainment Group demonstrates consistent revenue growth, improved profitability, and a strong balance sheet characterized by low leverage and high liquidity. The company's ability to generate cash flow is robust, supporting its operations and growth initiatives. While some fluctuations in revenue and free cash flow over past years suggest potential variability, the overall financial health of the company is strong, positioning it well within the Interactive Multi-Media industry.Income Statement
Tencent Music Entertainment Group has shown consistent revenue growth, with a notable increase from 27.75 billion in 2023 to 28.40 billion in 2024, reflecting a healthy revenue growth rate of 2.34%. The gross profit margin improved to 42.34% in 2024, indicating strong cost management and an increase in profitability. Net profit margin also improved to 23.39% in 2024, showcasing enhanced efficiency in converting revenue into actual profit. Both EBIT and EBITDA margins have increased over the years, reflecting operational efficiency improvements. However, there was a slight revenue decline from 2020 to 2023, which suggests some volatility in revenue generation.78
Positive
Balance Sheet
The company maintains a solid balance sheet with a low debt-to-equity ratio of 0.06 in 2024, indicating minimal leverage and reduced financial risk. The equity ratio is robust at 75.03%, reflecting strong equity financing and asset management. Return on equity has increased to 9.79% in 2024, highlighting improved profitability from shareholder investments. The company's high cash and short-term investments relative to total debt ensure strong liquidity, reducing default risk.85
Very Positive
Cash Flow
Tencent Music Entertainment's cash flow position is strong, with operating cash flow growing significantly from 7.34 billion in 2023 to 10.28 billion in 2024. The free cash flow has also increased, indicating efficient capital expenditure management with substantial cash available for reinvestment or distribution. The operating cash flow to net income ratio is favorable, implying effective conversion of net income into cash flow. However, fluctuations in free cash flow over the years could signal variability in cash generation capabilities.82
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 28.40B | 27.75B | 28.34B | 31.24B | 29.15B | Gross Profit |
| 12.03B | 9.79B | 8.77B | 9.40B | 9.30B | EBIT |
| 8.71B | 6.06B | 4.44B | 2.75B | 4.71B | EBITDA |
| 8.23B | 7.17B | 5.65B | 4.75B | 5.55B | Net Income Common Stockholders |
| 6.64B | 4.92B | 3.68B | 3.03B | 4.16B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 27.21B | 23.54B | 20.88B | 20.43B | 26.02B | Total Assets |
| 90.44B | 75.54B | 67.01B | 67.25B | 68.27B | Total Debt |
| 3.90B | 6.05B | 5.96B | 5.36B | 5.50B | Net Debt |
| -9.27B | -7.52B | -3.59B | -1.23B | -5.63B | Total Liabilities |
| 20.72B | 18.33B | 17.88B | 16.20B | 15.54B | Stockholders Equity |
| 67.86B | 55.91B | 48.10B | 50.32B | 52.24B |
| Cash Flow | Free Cash Flow | |||
| 10.28B | 6.17B | 6.43B | 2.48B | 4.38B | Operating Cash Flow |
| 10.28B | 7.34B | 7.48B | 5.24B | 4.88B | Investing Cash Flow |
| -6.82B | -1.86B | -1.45B | -6.00B | -14.21B | Financing Cash Flow |
| -3.83B | -1.54B | -3.42B | -3.71B | 5.29B |
Tencent Music Entertainment Group Technical Analysis
Neutral
12.96
Price Trends
12.92
Positive
12.11
Positive
12.16
Positive
Market Momentum
0.50
Negative
59.55
Neutral
41.50
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TME, the sentiment is Neutral. The current price of 12.96 is below the 20-day moving average (MA) of 13.65, above the 50-day MA of 12.92, and above the 200-day MA of 12.16, indicating a neutral trend. The MACD of 0.50 indicates Negative momentum. The RSI at 59.55 is Neutral, neither overbought nor oversold. The STOCH value of 41.50 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 0 New Risks
Tencent Music Entertainment Group Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $23.15B | 21.65 | 10.75% | 1.02% | 0.63% | 34.09% | |
76 Outperform | $31.67B | 8.99 | 9.14% | ― | -2.60% | 16.71% | |
75 Outperform | $112.12B | 82.37 | 28.91% | ― | 18.36% | ― | |
63 Neutral | $2.31B | 7.56 | 8.74% | ― | -0.29% | -12.84% | |
58 Neutral | $25.21B | 3.07 | -13.86% | 4.29% | 2.47% | -43.03% | |
52 Neutral | $2.19B | ― | -2.96% | ― | -1.33% | -148.56% | |
49 Neutral | $224.48M | ― | -5.43% | ― | -24.10% | -953.50% |
* Communication Services Sector Average
Performance Comparison
TME
Tencent Music Entertainment Group
12.96
1.61
14.19%
BIDU
Baidu
82.43
-20.62
-20.01%
JOYY
JOYY
39.14
4.21
12.05%
WB
Weibo
8.60
0.61
7.63%
SPOT
Spotify
503.30
194.23
62.84%
DOYU
DouYu International Holdings
6.22
4.77
328.97%
Tencent Music Entertainment Group Earnings Call Summary
Earnings Call Date: Mar 18, 2025 | % Change Since: 0.47% | Next Earnings Date: May 19, 2025
Earnings Call Sentiment Positive
The earnings call demonstrated a strong financial performance with notable growth in revenues, profits, and subscriber base. The company's focus on innovation, AI integration, and strategic partnerships has driven positive results. Despite challenges in social entertainment and balancing subscriber growth with ARPPU, the overall outlook remains optimistic with a significant dividend and share repurchase program to reward shareholders.Highlights
Strong Revenue and Profit Growth
Total revenues in Q4 2024 were RMB7.5 billion, up by 8% year-over-year. Online music revenues increased by 16% year-over-year, driven by strong growth in music subscription and advertising revenues. Net profit increased by 47% year-over-year to RMB2.1 billion.
Expanding Subscriber Base and ARPPU
The number of online music paying users reached 121 million, a 13% increase year-over-year, with a quarterly net addition of 2 million users. Monthly ARPU increased to RMB11.1 from RMB10.7 in the same period of the previous year.
Significant Progress in SVIP Membership
SVIP membership program showed strong sequential growth in membership and ARPPU. SVIP offerings, including enhanced audio quality and exclusive content, have gained significant recognition from users.
Focus on Innovation and AI Integration
TME has integrated advanced AI capabilities, such as DeepSeek, to enhance user experience and music creation, driving user engagement and retention.
Successful Partnerships and Content Expansion
Renewed strategic contracts with international labels and expanded partnerships with renowned Chinese artists, increasing the music library to over 260 million tracks by the end of 2024.
Improved Gross Margin
Gross margin in Q4 reached 43.6%, an increase of 5.3 percentage points year-over-year, driven by subscription revenue growth and optimized content costs.
Announced Dividend and Share Repurchase Program
Announced an annual dividend of $273 million and a new and expanded share repurchase program of up to $1 billion.
Lowlights
Decline in Social Entertainment Services
Social entertainment services and other revenues were RMB1.6 billion, down by 13% year-over-year, though the segment showed some sequential improvement.
Challenges in Balancing Subscriber Growth and ARPPU
Management noted the challenge of balancing subscriber growth with ARPPU, as subscribers are price sensitive and strategic pricing is critical for sustainable growth.
Company Guidance
During Tencent Music Entertainment Group's Fourth Quarter and Full Year 2024 Earnings Conference Call, management provided guidance reflecting optimism for continued growth in 2025. They highlighted a return to top-line growth, with a notable 8% year-over-year increase in total revenues, reaching RMB7.5 billion in Q4 2024. Online music revenues saw a 16% rise, driven by a robust 18% growth in music subscription revenues, achieving a monthly ARPU of RMB11.1. The company reported a significant net profit increase of 47% year-over-year to RMB2.1 billion. For 2025, Tencent Music anticipates further growth in subscriber numbers and ARPPU, bolstered by their dual-engine strategy of rich content and platform innovation. They also announced a new share repurchase program of up to $1 billion and an annual dividend of $273 million, signaling a commitment to shareholder returns amid their strategic focus on expanding SVIP memberships and enhancing their advertising business.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.