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On Wednesday, Mizuho (NYSE:MFG) Securities demonstrated confidence in Tencent Music Entertainment Group (NYSE:TME) by raising its price target from $16.00 to $17.00, while keeping an Outperform rating on the stock. The revision follows Tencent (HK:0700) Music’s recent financial results, which exceeded market expectations in terms of revenue and profit margins. The company, currently valued at $23.9 billion, maintains a healthy 42.3% gross profit margin and trades at a P/E ratio of 25.7.
Tencent Music’s performance for the quarter was characterized by strong results in its core music business, which according to Mizuho analysts, highlights the company’s value to music enthusiasts and the management’s ability to drive balanced growth. The social entertainment segment of Tencent Music also showed promising signs, with sequential revenue growth that suggests improving fundamentals. The company has demonstrated impressive momentum, with a 23.4% return in the past week and a 52% return over the last six months. The analysts believe that if this trend continues, it could potentially lead to double-digit consolidated revenue growth, compared to the high-single-digits previously projected for the fiscal year 2025.
The research firm remains positive about Tencent Music’s prospects, citing its leading position in China’s underpenetrated online music market. Mizuho’s analysts have increased their fiscal year 2026 EBITDA estimate by 3% to RMB 12 billion, reflecting a more optimistic view on the company’s margin outlook.
The raised price target to $17 from $16 is a result of Tencent Music’s clean quarterly performance and the potential for revenue growth in the social segment, which could enhance the company’s overall revenue trajectory. Mizuho’s Outperform rating indicates their belief that Tencent Music shares will perform better than the broader market or its sector average over a given time frame.
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 (US$0.17), surpassing the analyst consensus of RMB1.22. Revenue for the quarter reached RMB7.46 billion (US$1.02 billion), topping the anticipated RMB7.3 billion and reflecting an 8.2% year-over-year increase. Tencent Music also announced an annual dividend and an expanded share repurchase program, with a cash dividend of approximately US$273 million and a new Share Repurchase Program of up to US$1 billion over 24 months. The company’s music subscription business was a key driver, with revenues rising 18% year-over-year to RMB4.03 billion (US$552 million) and the number of paying users increasing by 13.4% to 121 million. For the full year 2024, total revenues were RMB28.40 billion (US$3.89 billion), marking a 2.3% year-over-year growth. Music subscription revenues for the year grew 25.9% year-over-year to RMB15.23 billion (US$2.09 billion). These developments reflect Tencent Music’s strategy to enhance shareholder value and solidify its position in the online music market.
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