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On Tuesday, CFRA analyst Ahmad Halim updated the price target for Tencent Music Entertainment Group (NYSE:TME) shares, increasing it to $15.00 from the previous $14.00, while reiterating a Buy rating on the stock. The revised target reflects a forward price-to-earnings (P/E) multiple of 23.3 times for the year 2025, which is slightly higher than the company’s five-year average P/E of 21.7 times. According to InvestingPro data, TME currently trades at a P/E of 24.41, with a notably low PEG ratio of 0.92, suggesting attractive valuation relative to its growth prospects. The company maintains a "GREAT" Financial Health Score of 3.4 out of 4.
The price target adjustment is based on expected momentum in the company’s Online Music Services (OMS), driven by subscription-led growth and advertising penetration, which are anticipated to contribute to revenue growth through 2025. The influence of weaker Social Entertainment Services (SES) is projected to wane as its share of total revenue decreases. With current revenue of $3.97 billion and strong cash flows exceeding debt obligations, TME demonstrates robust financial fundamentals. InvestingPro analysis reveals 8 additional key insights about TME’s growth potential and market position.
CFRA’s outlook is further buoyed by the return to revenue growth in the third quarter of 2024, highlighted by a 20% increase in OMS revenue. Although margin expansion could slow as subscription revenue approaches a saturation point at 70%, increased advertising revenues and operational efficiencies are expected to continue supporting profitability.
The analyst also notes potential benefits from lower revenue-sharing costs associated with SES and controlled selling, general, and administrative (SG&A) expenses. These factors could provide Tencent (HK:0700) Music with the flexibility to invest in content and offline concerts without negatively impacting margins.
Investors and analysts alike are looking forward to Tencent Music’s 2024 earnings report, expected in mid-March 2025, for indicators of a sustained uptrend in revenue and margins that would support CFRA’s positive thesis.
In other recent news, Tencent Music Entertainment Group has announced it will release its financial results for the fourth quarter and full year of 2024 on March 18, 2025. This announcement is highly anticipated as it will provide insights into the company’s performance for the period ending December 31, 2024. Meanwhile, Bernstein SocGen Group has maintained its Outperform rating on Tencent Music, with a price target of $13.00, highlighting optimism about the company’s future. This positive outlook is partly due to Tencent Music’s upcoming launch of the Bubble service on its QQ Music platform, in collaboration with Dear U (KQ:376300), a subsidiary of SM Entertainment. Bubble aims to enhance artist-fan interactions by offering exclusive content and messages, and its success in Korea suggests it could significantly boost fan engagement. Additionally, the service is expected to expand into Tencent Music’s other apps, Kuwo and Kugou, further enhancing its reach. Bernstein SocGen Group has also reaffirmed a $14.00 price target, indicating confidence in Tencent Music’s ability to outperform its sector peers. These developments underscore Tencent Music’s strategic initiatives to strengthen its position in the competitive music streaming market.
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