Tencent Music Entertainment Group (NYSE:TME) Analysts Are Pretty Bullish On The Stock After Recent Results

Investors in Tencent Music Entertainment Group (NYSE:TME) had a good week, as its shares rose 9.1% to close at US$11.40 following the release of its full-year results. The result was positive overall - although revenues of CN¥28b were in line with what the analysts predicted, Tencent Music Entertainment Group surprised by delivering a statutory profit of CN¥3.11 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Tencent Music Entertainment Group

Following the latest results, Tencent Music Entertainment Group's 28 analysts are now forecasting revenues of CN¥28.6b in 2024. This would be an okay 2.9% improvement in revenue compared to the last 12 months. Per-share earnings are expected to expand 19% to CN¥3.74. Before this earnings report, the analysts had been forecasting revenues of CN¥28.2b and earnings per share (EPS) of CN¥3.36 in 2024. Although the revenue estimates have not really changed, we can see there's been a decent improvement in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

The consensus price target rose 18% to US$11.88, suggesting that higher earnings estimates flow through to the stock's valuation as well. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Tencent Music Entertainment Group analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$8.00. This is a very narrow spread of estimates, implying either that Tencent Music Entertainment Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Tencent Music Entertainment Group's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 2.9% growth on an annualised basis. This is compared to a historical growth rate of 5.7% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 8.1% annually. Factoring in the forecast slowdown in growth, it seems obvious that Tencent Music Entertainment Group is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Tencent Music Entertainment Group following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Tencent Music Entertainment Group's revenue is expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Tencent Music Entertainment Group analysts - going out to 2026, and you can see them free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.