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On Friday, CFRA analyst Ahmad Halim updated the firm’s outlook on Tencent Music Entertainment Group (NYSE:TME), increasing the price target from $15.00 to $17.00 while sustaining a Buy rating for the stock. The adjustment follows Tencent (HK:0700) Music’s earnings surpassing expectations in 2024. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis, with 4 analysts recently revising their earnings estimates upward.
The analyst provided a revised earnings per ADS (EPADS) estimate for 2025, lifting it to CNY5.35 from the previous CNY4.66. Additionally, CFRA initiated a forecast for 2026 with an EPADS of CNY6.25. The new 12-month target price is based on an implied P/E multiple of 23 times the projected 2025 EPADS, which is a slight premium over the company’s five-year average P/E of 21.5 times.
Tencent Music has been recognized for its successful transformation into a premium, subscription-driven platform within China’s dynamic music industry. The analyst believes that the company’s strategic emphasis on increasing its paying subscriber base and improving ad monetization will contribute to consistent revenue growth and margin expansion in 2025. InvestingPro analysis shows the company’s strong financial health with a "GREAT" overall score of 3.28, supported by an attractive PEG ratio of 0.69, indicating good value relative to growth potential. Get access to 8 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.
According to CFRA’s projections, Tencent Music’s EBITDA margin is expected to rise from 29% in 2024 to 33.1% in 2025. This anticipated growth is attributed to a favorable shift in revenue mix towards high-margin subscriptions and advertising. With a strong operating cash flow and a net cash position of CNY21.2 billion, Tencent Music is positioned to comfortably support its growth strategies while continuing to deliver substantial returns to shareholders. The company’s solid financial position is reflected in its healthy current ratio of 2.09 and last twelve months EBITDA of $1.13 billion, as reported by InvestingPro.
In other recent news, Tencent Music Entertainment Group reported fourth-quarter earnings that exceeded analyst expectations, with adjusted earnings per American Depositary Share reaching RMB1.26, surpassing the consensus estimate of RMB1.22. The company also reported revenue of RMB7.46 billion for the quarter, an 8.2% year-over-year increase, driven by strong growth in its online music services. In addition to these results, Tencent Music announced an annual cash dividend of approximately $273 million and a new $1 billion share repurchase program set to begin in March 2025.
Benchmark analysts maintained a Buy rating on Tencent Music, raising the price target to $19 from $15, citing a 45% year-over-year earnings growth in the fourth quarter. They highlighted the company’s disciplined expense management and structural drivers for margin expansion as key factors. Mizuho (NYSE:MFG) Securities also expressed confidence by raising its price target to $17 from $16, maintaining an Outperform rating due to the company’s strong quarterly performance and potential revenue growth in its social entertainment segment.
Bernstein SocGen Group raised its price target for Tencent Music to $15 from $13, reaffirming an Outperform rating based on the company’s strong near-term earnings growth. However, they noted concerns about the sustainability of the business model amid increasing competition and a decline in monthly active users. These developments underscore Tencent Music’s focus on shareholder value and strategic growth initiatives.
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