Cloud Music Inc. (HKG:9899) About To Shift From Loss To Profit

With the business potentially at an important milestone, we thought we'd take a closer look at Cloud Music Inc.'s (HKG:9899) future prospects. Cloud Music Inc., an investment holding company, engages in the operation of online platforms to provide music and social entertainment services in the People’s Republic of China. The HK$15b market-cap company announced a latest loss of CN¥221m on 31 December 2022 for its most recent financial year result. The most pressing concern for investors is Cloud Music's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Cloud Music

Cloud Music is bordering on breakeven, according to the 11 Hong Kong Entertainment analysts. They expect the company to post a final loss in 2022, before turning a profit of CN¥132m in 2023. The company is therefore projected to breakeven around 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 54% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Cloud Music's upcoming projects, but, bear in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that Cloud Music has no debt on its balance sheet, which is rare for a loss-making growth company, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of Cloud Music which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Cloud Music, take a look at Cloud Music's company page on Simply Wall St. We've also put together a list of pertinent factors you should look at:

1. Valuation: What is Cloud Music worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Cloud Music is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cloud Music’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.