On Tuesday, Tencent (HK:0700) Music Entertainment Group (NYSE:TME) received a positive adjustment from Benchmark, with the firm raising the stock's price target to $19.00 from $14.00, while reiterating a Buy rating.
The upgrade follows Tencent Music's first-quarter results for 2024, which showcased significant achievements, including a record high in quarterly net additions of 6.8 million music subscribers. The company's online music segment saw accelerated growth, bolstered by both subscription revenue and advertising.
Analysts highlighted the company's impressive gross profit margin (GPM) expansion, both year-over-year by 789 basis points and quarter-over-quarter by 263 basis points. Furthermore, Tencent Music announced the initiation of an annual dividend.
Benchmark's analysts are optimistic about Tencent Music's prospects, citing its enriched content library and the launch of innovative product offerings. They anticipate that the company will benefit from applications of AI and GenAI technology in the future. The firm's confidence in Tencent Music's sustained online music growth and structural margin expansion has led to increased estimates for the fiscal years 2024 and 2025.
The raised price target to $19 reflects upward earnings revisions and multiple expansions. Benchmark views Tencent Music as a standout mid-cap investment within the China ADR space, indicating strong potential for the company's stock performance in the market.
InvestingPro Insights
Following the upbeat analysis from Benchmark, Tencent Music Entertainment Group 's (NYSE:TME) financial health and market performance further underscore the optimism surrounding the company. According to InvestingPro data, TME holds a market capitalization of 23.07 billion USD, and despite a slight decline in revenue growth over the last twelve months as of Q1 2024, the company maintains a robust gross profit margin of 37.25%. The data also reveals a significant one-year price total return of 103.3%, reflecting strong investor confidence.
Two InvestingPro Tips that align with the article's positive outlook include the fact that Tencent Music holds more cash than debt, indicating a solid balance sheet, and that three analysts have revised their earnings upwards for the upcoming period, suggesting a consensus on the company's promising financial trajectory. For investors seeking a comprehensive analysis, there are additional InvestingPro Tips available, including insights on valuation metrics and growth potential. To delve deeper into these strategies and access the full suite of tips, visit https://www.investing.com/pro/TME and use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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