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Tencent Music Entertainment (NYSE:TME) jumped 9.1% Wednesday as analysts upgraded the company’s ratings following Tuesday’s earnings beat.
Citi moved from a Neutral stance to upgrade TME to Buy, and boosted its price target to $9.70, highlighting a turn to positive revenue growth — revenues rose 5.4% year-over-year, to 7B yuan — and impressive profit growth of 57%. That led the bank to boost estimates for revenues by 1.9%, 3.7% and 4.3% over the coming three years respectively, and boosting net income expectations to +15.2%, +16.7% and +16.1% respectively.
Online music paying users hit 94.4M, up from last quarter’s 88.5M, showing accelerating growth, Citi’s Alicia Yap noted, attributing that to quality improvement in the subscription service, attractive content/features, and increasing willingness to pay on premium features.
Macquarie Research upgraded to Neutral after a “solid print.”
“While revenue growth remained in the single-digit trajectory, we believe much of the downside risks have now been baked into market expectations and current valuation,” analyst Ellie Jiang said.
“We anticipate steady growth for both music paying subs and [average revenue per user], which could drive a 6% group-level revenue increase in 2023,” Jiang said.
China Renaissance also boosted the stock to Buy and raised its price target to $10.60, implying a solid 27% upside.
For more detail, see Seeking Alpha’s transcript of Tencent Music’s earnings call.
