Tencent Music Entertainment Group (NYSE: $TME) (HK:1698) is a leader in China’s online music industry. It operates the highly popular music streaming apps Kugou Music, QQ Music, WeSing, and Kuwo Music. Tencent Music is a subsidiary of Tencent Holdings Ltd. It also sells online ad space, digital music singles and albums, and licenses content.
On Monday, May 13, 2024, Tencent Music released its Q1 results for fiscal 2024 to a positive market reception after a quarterly revenue beat.
Tencent Music Beats Revenue Estimates in Q1 Results
In the first quarter, Tencent Music reported revenue of 6.77 billion yuan ($937 million), a 3.4% Y/Y decline but above estimates of 6.63 billion yuan.
The revenue decline was driven by a decline in revenue in the social entertainment services, [partially offset by strong growth from online music services. Music subscription revenue grew 39.2% Y/Y to 3.62 billion yuan ($501 million), while the number of paying subscribers increased 202.2% Y/Y to 113.5 million. Sequentially, the number of paying subscribers increased by 6.8 million, the biggest sequential increase to date.
Net profit came in at 1.53 billion yuan ($212 million), a 27.5% increase Y/Y, while diluted EPS came in at 0.91 yuan ($0.13) compared to 0.73 yuan the previous year and in line with estimates of $0.13.
Shareholder Returns
Tencent Music ended the first quarter with 34.18 billion yuan ($4.73 billion) in total liquidity. It declared an annual cash dividend of around $210 million for fiscal 2023.
The company also announced that it had bought back 32.2 million ADS shares for $235.5 million under the existing $500 million share buyback program.
Tencent Music (TME) Stock Performance
Following the stellar performance in Q1, TME shares listed on the NYSE rose 10.57% to $14.75 as of 10:29 AM EDT. The shares have gained 68.90% this year and 85.24% in the past 52 weeks, beating the SPX, which has gained 26.27% in the past 52 weeks.
The short interest in the stock has increased by 22.9% in the past month to 25.81 million shares as of April 30, 2024. That represents 1.50% of the shares outstanding.
Looking at the share distribution, 52.04% of the stock is held by institutional traders, with insiders holding no stake in the stock.
The stock is trading above its 50 DMA and 200 DAM of $11.56 and $8.75, respectively. TME shares have a current volume of 10.11 million, above the average three-month volume of 7.94 million.
Analysts’ Outlook on TME Stock
Stock analysts are bullish on TME stock, with 12 giving it an overall strong buy rating. They forecast a wide range for the stock in the next 12 months, with a high of $15 and a low of $10.40. Their average price forecast of $13.16 is a 10.60% upside based on the most recent price.
Should You Add TME To Your Portfolio?
From a technical perspective, the stock’s short-term signals are positive, and there are signs the current levels present a buy opportunity as the stock is forecast to do well in the short term. For value investors, the valuation metrics signal it is a neutral pick.
The company has demonstrated financial health and continued growth. However, it would be a poor choice for momentum investors, as forecasts show the stock lacks momentum.
However, as with other Chinese companies, investors must be cognizant of geopolitical risks. Tech companies based in China have seen an extensive regulatory crackdown, such as the recent TikTok bill, and this trend is unlikely to change in the coming months.
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