Jefferies has reaffirmed its Buy rating on Tencent Music Entertainment Group (NYSE: NYSE:TME) with a consistent price target of $15.40. The company's second-quarter 2024 results matched the consensus revenue expectations.
Tencent Music's online music services segment performed as anticipated, with a reported increase of 3.5 million in quarterly net additions, slightly below the 3.7 million projected by Jefferies. The social entertainment services revenue also aligned with the firm's forecasts.
The gross profit margin (GPM) for Tencent Music was reported at 42%, marginally surpassing Jefferies' prediction of 41.5%. Additionally, the company's non-IFRS net income exceeded both the consensus and Jefferies' estimates by 7%. These financial outcomes indicate a positive performance for the company in the quarter.
Tencent Music's management is scheduled to conduct an earnings call at 7 pm Hong Kong Time today. The call is expected to provide investors with further insights into the company's quarterly performance and future outlook.
Tencent Music Entertainment Group reported its second-quarter financials, revealing a slight decrease in total revenues of 1.7% year-over-year to 7.16 billion yuan. Despite this, the company managed to surpass Citi's projections by 2.4%.
A significant rise of 27.7% in online music services revenues, reaching 5.42 billion yuan, primarily fueled this performance. Moreover, the company's subscription revenue climbed by 29.4% year-over-year to 3.74 billion yuan.
However, social entertainment revenues experienced a decline of 42.8% year-over-year, totaling 1.74 billion yuan, due to service enhancement and risk control measures. Tencent Music's adjusted net profit was reported at 1.99 billion yuan, marking a substantial increase of 25.7% compared to the same period last year, exceeding both Citi's and consensus estimates. Citi maintains a Buy rating on Tencent Music with an $18 target.
InvestingPro Insights
As we delve into the financial health and market performance of Tencent Music Entertainment Group (NYSE:TME), InvestingPro data underscores some key metrics. The company holds a market capitalization of $20.77 billion, reflecting its substantial presence in the industry. Despite a slight decline in revenue growth over the last twelve months, with a -4.12% change, the company maintains a robust gross profit margin of 37.25%. This profitability metric aligns with the positive gross profit margin (GPM) reported in the article, indicating Tencent Music's ability to manage its cost of goods sold effectively.
InvestingPro Tips highlight that Tencent Music is trading at a high P/E ratio of 28.16 relative to near-term earnings growth, suggesting that investors have high expectations for the company's future earnings. Additionally, with seven analysts revising their earnings upwards for the upcoming period, there is a sense of optimism surrounding the company's financial prospects. For readers interested in a deeper analysis, there are additional InvestingPro Tips available, providing further insights into Tencent Music's financial and market performance.
The article's mention of the company's consistent performance and positive outlook from Jefferies is complemented by the InvestingPro data and tips, painting a comprehensive picture for investors. The InvestingPro Fair Value of $14.01, slightly below Jefferies' target, offers an alternative valuation perspective for consideration. As stakeholders anticipate the earnings call, these insights can help inform their understanding of Tencent Music's current standing and future potential.
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