TME Will Likely Overcome Streaming Competition Concerns And Rebound From Recent Selloff

Analysts have trimmed their price target on Tencent Music Entertainment Group to approximately $30.26 from about $32.95, reflecting expectations of stronger top-line growth but moderating profit margins and limited near term re-rating catalysts.

Analyst Commentary

Recent Street research presents a mixed but generally constructive view on Tencent Music Entertainment Group, with several bullish analysts emphasizing resilient fundamentals, healthy execution and attractive entry levels following the recent share price pullback.

Despite some downward revisions to earnings forecasts and margin assumptions, the consensus among more optimistic voices is that Tencent Music's growth trajectory remains intact, particularly as the company continues to deliver solid quarterly results and provide encouraging guidance.

Concerns around competitive threats from new entrants in the streaming space are seen by bullish analysts as more sentiment driven than structural, with Tencent Music's core user paying proposition viewed as largely unaffected and its strategic positioning in China's online music ecosystem remaining strong.

Bullish Takeaways

• Bullish analysts highlight the recent post earnings selloff as an enhanced buying opportunity, arguing that the stock's pullback to the high teens does not reflect Tencent Music's solid Q3 execution or positive Q4 commentary, which they see as creating a favorable risk reward profile for long term investors.
• Some bullish analysts have raised or maintained price targets in the high twenties, signaling confidence that Tencent Music can sustain top line growth and regain valuation multiples more in line with sector peers once near term sentiment overhangs subside.
• Positive views emphasize that the company's growth story is intact, with continued user engagement and monetization improvements expected to underpin both revenue expansion and longer term margin stabilization, which in turn is seen as supporting upside to current market expectations.
• Competitive concerns, particularly around newer music apps, are seen by bullish analysts as overstated, given Tencent Music's entrenched ecosystem, strong content partnerships and proven ability to defend and deepen its paying user base, all of which are viewed as underappreciated drivers of potential future re rating.

Valuation Changes

• Fair Value Estimate has fallen moderately to approximately $30.26 from about $32.95, reflecting a more conservative outlook on profitability.
• Discount Rate is essentially unchanged at around 9.80 percent, indicating a stable risk assessment for Tencent Music's equity.
• Revenue Growth assumptions have risen meaningfully to roughly 21.9 percent from about 18.6 percent, pointing to stronger expected top line expansion.
• Net Profit Margin forecasts have fallen significantly to about 25.9 percent from roughly 31.5 percent, implying greater cost pressure or investment needs.
• Future P/E multiple has been trimmed slightly to around 29.2x from about 29.9x, suggesting a marginally lower valuation premium on forward earnings.