Tencent Music price target raised to $26.20 from $17.10 at Macquarie

Macquarie raised its price target on Tencent Music Entertainment Group (NYSE:TME) to $26.20 from $17.10 on Tuesday, while maintaining an Outperform rating on the stock. The stock, currently trading near its 52-week high of $19.40, has delivered impressive returns with a 68.2% gain year-to-date. According to InvestingPro analysis, TME appears slightly undervalued based on its Fair Value calculations.

The research firm cited Tencent (HK:0700) Music’s transformation from a downstream pure play streaming service into an "all-rounded music powerhouse" spanning music, audio, labels, and live experiences. This upstream expansion could enhance the company’s pricing power through reduced licensing dependence and more diversified monetization opportunities. With a market capitalization of $28.89 billion and a GREAT financial health score from InvestingPro, TME demonstrates strong fundamentals to support this transformation.

Macquarie expressed confidence in Tencent Music’s continued penetration in premium subscriptions, with immersive content like audiobooks and exclusive access to concerts driving average revenue per paying user growth. The firm projects approximately 20% year-over-year music revenue growth for Tencent Music in 2025. The company’s current revenue growth stands at 5.35%, with a P/E ratio of 21.21, suggesting room for expansion.

Recent acquisitions including Ximalaya, SM Entertainment, and DearU were described as value-accretive by Macquarie, noting these moves help solidify Tencent Music’s content ecosystem through vertical integration of content diversification, artist partnerships, and fan economy.

Tencent Music’s stronger bargaining power along the value chain and superior distribution capabilities both online and offline create a favorable cost structure that should support continued margin expansion, according to the research firm.

In other recent news, Tencent Music Entertainment Group reported robust financial results for the first quarter of 2025, with revenue increasing by 8.7% year-over-year to RMB 7.4 billion. The growth was driven by a 15.9% rise in online music services revenue, reaching RMB 5.8 billion, largely due to a 16.6% increase in music subscription services. Additionally, the company’s net profit surged to RMB 4.39 billion, supported by one-off gains. In terms of analyst activity, Morgan Stanley (NYSE:MS) raised its price target for Tencent Music to $18.00, citing potential revenue upside from advertising and album sales, while maintaining an Overweight rating. Similarly, Bernstein SocGen Group increased its price target to $20, highlighting a strategic partnership with SM Entertainment as a significant factor. However, CFRA downgraded Tencent Music’s stock from "Buy" to "Hold," despite raising the price target to $18.00, due to a valuation that they believe now fully reflects the company’s medium-term earnings potential. Tencent Music also announced its upcoming Annual General Meeting scheduled for June 27, 2025, in Shenzhen, China, as part of its compliance with U.S. securities laws.

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