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On Wednesday, Benchmark analysts maintained their positive outlook on Tencent Music Entertainment Group (NYSE:TME), reiterating a Buy rating while raising the price target to $19 from the previous $15. The adjustment follows Tencent (HK:0700) Music’s announcement of its fourth-quarter results, which showcased a significant 45% year-over-year earnings growth. With annual revenue of $3.89 billion and a healthy gross margin of 42.34%, the company’s disciplined approach to managing expenses, alongside structural drivers for margin expansion, were highlighted as key factors contributing to the robust earnings performance. According to InvestingPro data, TME’s stock has surged 23.39% in the past week, reflecting strong investor confidence in these results.
Tencent Music’s financial results indicate a promising future, with the company anticipating improved revenue, margins, and artificial intelligence-driven innovation in the fiscal year 2025. Benchmark’s analysts project an earnings growth at a compound annual growth rate (CAGR) of over 20% for the fiscal years 2024 through 2026. This projection is underpinned by the company’s focus on high-quality growth in music subscriptions and advertising, which is expected to yield potential earnings upside. InvestingPro analysis reveals TME’s strong financial health with a "GREAT" overall score of 3.31, supported by robust metrics including a comfortable current ratio of 2.09. (Unlock 10+ additional ProTips and comprehensive analysis with InvestingPro.)
The company has also demonstrated a commitment to enhancing shareholder value. It has announced a substantial cash dividend of $273 million for the fiscal year 2024 and introduced a new $1 billion share repurchase program set to commence on March 25. The strategic move to return value to shareholders is part of Tencent Music’s broader plan to sustain strong shareholder returns well beyond the year 2025.
Tencent Music’s recent financial achievements and forward-looking strategies have evidently bolstered the confidence of Benchmark analysts, leading to the uplifted price target. The company’s sustained focus on growth and shareholder returns is set to remain a cornerstone of its strategy in the coming years.
In other recent news, Tencent Music Entertainment Group reported fourth-quarter earnings that exceeded analyst expectations, driven by robust growth in its online music services. The company posted adjusted earnings per American Depositary Share of RMB1.26, surpassing the analyst consensus of RMB1.22, and reported revenue of RMB7.46 billion, which was above the expected RMB7.3 billion. Tencent Music also announced an annual dividend of approximately US$273 million and expanded its share repurchase program by authorizing up to US$1 billion over a 24-month period starting in March 2025. For the full year 2024, the company saw total revenues rise to RMB28.40 billion, with music subscription revenues increasing by 25.9% year-over-year.
Mizuho (NYSE:MFG) Securities responded to these results by raising Tencent Music’s price target from $16 to $17, while maintaining an Outperform rating. The firm highlighted the strong performance in Tencent Music’s core music business and noted promising growth in its social entertainment segment. Mizuho’s analysts have also increased their fiscal year 2026 EBITDA estimate by 3% to RMB 12 billion, reflecting a positive outlook on the company’s margin potential. They believe that Tencent Music’s leading position in China’s online music market positions it well for future growth. These recent developments underscore the company’s solid financial performance and strategic initiatives aimed at enhancing shareholder value.
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