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On Monday, Bernstein SocGen Group analysts raised the price target for Tencent Music Entertainment Group stock (NYSE:TME) to $20 from $15.50, while maintaining an Outperform rating. Currently trading at $17.27 and showing a remarkable 50% gain year-to-date, the stock appears undervalued according to InvestingPro analysis. The analysts highlighted that a strategic stake and partnership with SM Entertainment is a key factor in this decision.
The analysts noted that the partnership is strategically beneficial, enhancing Tencent (HK:0700) Music’s product ecosystem. With a robust market capitalization of $27.14 billion and an impressive financial health score rated as "GREAT" by InvestingPro, the company is well-positioned for this expansion. The deal is primarily strategic, focusing on acquiring unique music and non-music content to bolster Tencent Music’s ecosystem.
The partnership with SM Entertainment is expected to provide Tencent Music with unique content opportunities. This includes music content and non-music ventures such as concerts, merchandise, and fan engagement. These elements are becoming increasingly important for Tencent Music’s SVIP premium offering. Want deeper insights? InvestingPro offers 12 additional investment tips and a comprehensive Pro Research Report for TME, helping investors make informed decisions.
The analysts emphasized that the value of this partnership lies in strengthening Tencent Music’s content ecosystem, rather than immediate financial gains from the SM Entertainment stake. With steady revenue growth of 5.35% and a moderate P/E ratio of 19.55, the company shows strong fundamentals. The partnership serves as a model for Tencent Music to pursue further collaborations with Asian record labels, solidifying its position as a preferred platform for labels.
In other recent news, Tencent Music Entertainment Group reported strong financial results for the first quarter of 2025, with revenue rising by 8.7% year-over-year to RMB 7.4 billion. The increase was driven by a 15.9% boost in online music services revenue, reaching RMB 5.8 billion, and a significant rise in net profit to RMB 4.39 billion. CFRA analysts reacted to these results by raising their earnings per ADS forecast to CNY5.55 and adjusting their stock rating from "Buy" to "Hold," while increasing the price target to $18.00. Similarly, Jefferies raised the stock target to $17.00, maintaining a Buy rating, citing expectations for revenue acceleration and margin expansion by 2025.
Bernstein also raised its price target to $15.50, emphasizing Tencent Music’s growth strategy and the potential impact of the Super VIP program. Barclays (LON:BARC) maintained its Overweight rating and a $16.00 price target but noted a slower-than-expected growth in paying subscribers. The firm highlighted Tencent Music’s strategic shift towards organic growth over aggressive promotional tactics as a response to market dynamics. Meanwhile, the company announced its Annual General Meeting for June 27, 2025, in Shenzhen, China, as part of its compliance with U.S. securities laws. These developments reflect Tencent Music’s ongoing efforts to enhance its market position and financial performance.
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