Tencent Music Entertainment Q1 Subs Hit Record High, 2 Analysts Raise Forecasts

Shares of Tencent Music Entertainment Group TME dipped in early trading on Tuesday, after the company reported results for the first quarter.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

• Mizuho Securities analyst Wei Fang maintained a Buy rating, while lifting the price target from $15 to $17.
• Benchmark analyst Fawne Jiang reiterated a Buy rating, while raising the price target to $19.

Check out other analyst stock ratings.

Mizuho Securities: Tencent reported "strong" results for the first quarter, "with Core music revenue growth beating by 5 points on record-high subscriber net adds and advertising outperformance," Fang said in a note. The company's gross margins expanded by 260 basis points (bps) sequentially to 40.9%, on mix shift, and came 190bps above expectations.

Paying user net adds hit a record high of 6.8 million in the first quarter, driven by improving adoption and AI-powered user targeting, the analyst stated. "We expect the underlying drivers to continue supporting margin expansion for the coming quarters given TME's leading position in music distribution in China.”

Benchmark: Tencent's first-quarter results "checked all the boxes," with strong music subscriber growth and record high net additions, Jiang said. Online music growth accelerated due to both subscription and advertising.

"With its enriched content library and continued launch of innovative product offerings (including incremental benefit from AI and GenAI application down the road), we are positive on Tencent's sustained online music growth and, more importantly, its structural margin expansion ahead,” the analyst added.

TME Price Action: Shares of Tencent Music Entertainment declined by 1.42% to $14.60 at the time of publication on Tuesday.

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