Tencent Music (NYSE:TME): Evaluating Valuation After Strong Q3 Earnings and Growth in Online Music Services

Tencent Music Entertainment Group (NYSE:TME) reported third-quarter earnings that came in above expectations, supported by strong growth in online music services. Higher subscription numbers, live concert initiatives, and content partnerships played a major role in the company’s performance.

See our latest analysis for Tencent Music Entertainment Group.

The upbeat earnings and partnerships have captured investor attention, but Tencent Music Entertainment Group’s share price has been quite volatile lately. After a strong climb year-to-date, up 67.23% on a share price basis, momentum faded in recent months with a sharp drop in the past 90 days. Still, the company’s robust 73.09% total shareholder return over the past year stands out. That kind of performance puts long-term holders well ahead, even as the market resets its expectations after the last quarter’s stellar growth story.

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With shares still trading at a notable discount to analyst price targets despite recent gains, the question remains: is there untapped value here, or is Tencent Music's future growth already reflected in the current price?

Most Popular Narrative: 31.1% Undervalued

According to the most widely followed narrative, Tencent Music’s fair value stands well above the last close, suggesting there could be further upside. This view sharply contrasts with recent volatility and invites investors to rethink what’s already been priced in.

“Sustained user and revenue growth is being driven by rising smartphone and internet penetration in China, as reflected in record-high subscriber numbers (124 million) and increasing ARPPU. This supports long-term topline expansion and margin improvement.
The company is effectively capitalizing on shifting consumer preferences toward digital media through continuous innovation such as enhanced SVIP features, artist-centric privileges, and bundled offerings (for example, "bubble" for fan engagement). These improvements boost user stickiness, conversion, and recurring revenue.”

Read the complete narrative.

Ready to discover the bullish assumptions behind this value? Secrets of profit growth, ambitious revenue forecasts, and a surprisingly moderate future multiple form the foundation. Find out which bold expectations make this price target stand out. See what drives the sharpest minds to this conviction.

Result: Fair Value of $27.47 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent regulatory scrutiny and declining margins in new offline revenue streams could undermine the optimistic outlook circulating around Tencent Music’s growth story.

Find out about the key risks to this Tencent Music Entertainment Group narrative.

Build Your Own Tencent Music Entertainment Group Narrative

If you want your own perspective or feel inspired by the numbers, dive in and assemble your own narrative in minutes. Create your story, your way – Do it your way

A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding Tencent Music Entertainment Group.

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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.

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