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Tencent Music Entertainment Group (NYSE:TME): Is the Tempo Picking Up?

We came across a bullish thesis on Tencent Music Entertainment Group (NYSE:TME) on ValueInvestorsClub by StockOperator. In this article, we will summarize the bulls’ thesis on TME. The company’s shares were trading at $11.14 when this thesis was published, vs. the closing price of $13.32 on Mar 07.

A person on a laptop in the night, listening to Arabic music through a streaming application.

TME operates online music entertainment platforms to provide music streaming, online karaoke, and live streaming services in China. It also sells music-related merchandise; and artist-related merchandise, such as branded apparel, posters and art prints and accessories.

Over the past 5 years, TME has increased its paying users from 34 million to 127 million, clocking a CAGR of 30%. The management is focusing on its core strength, the online music segment that saw revenue contribution from 30% to 75%. The ARPPU for this segment increased from $1.30 to $1.50 in the last 8 quarters. The paying ratio has also increased from 3% to 20% and is expected to remain increasing in the next few years. In terms of profitability, its operating margin increased from 15% in 2017 to 31% in the latest quarter even though the MAU declined by ~200 million.

TME enjoys a duopoly with NetEase and this should sustain the business growth and margin expansion. Spotify was able to increase its paying ratio to 45% by offering promotional discounts and while this rate seems far-fetched, 30% paying ratio can be considered reasonable if the economic environment improves.

The stock price has been volatile over the last five years due to regulatory concerns but this has now been resolved. The potential of TME lies in the online music segment which can account for 88% of the revenue (currently 75%). This will not only provide a stable and lean business but also improve the overall margin for the company. TME is also looking to monetize its investment in AI by building use cases of in-vehicle apps and audiobooks. The monetization strategy has enabled TME to increase its paying user base at the rate of 15-20 million/year since 2020. Consequently, the gross margin has expanded from 30% to 40%. The Super VIP Tier is another segment to look out for since it offers an opportunity to increase revenue by $3-5 per user per month.

Under the base case scenario, paying users is expected to increase annually by 13 million (9.75 million converting from free to premium and 3.25 from premium to Super VIP). The incremental revenue from this transition would be $390 million. The forecasted revenue for 2028 is $6.4 billion and with an operating margin of 31%, EBIT should touch $2.1 billion. An EV/EBIT multiple of 14x should value the stock price at $22.60, a potential 70% gain from its current level.

While we acknowledge the potential of TME as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TME but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.

AI, Tariffs, Nuclear Power: One Undervalued Stock Connects ALL the Dots (Before It Explodes!)

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

AI is eating the world—and the machines behind it are ravenous.

Each ChatGPT query, each model update, each robotic breakthrough consumes massive amounts of energy. In fact, AI is already pushing global power grids to the brink.

Wall Street is pouring hundreds of billions into artificial intelligence—training smarter chatbots, automating industries, and building the digital future. But there’s one urgent question few are asking:

Where will all of that energy come from?

AI is the most electricity-hungry technology ever invented. Each data center powering large language models like ChatGPT consumes as much energy as a small city. And it’s about to get worse.

Even Sam Altman, the founder of OpenAI, issued a stark warning:

“The future of AI depends on an energy breakthrough.”

Elon Musk was even more blunt:

“AI will run out of electricity by next year.”

As the world chases faster, smarter machines, a hidden crisis is emerging behind the scenes. Power grids are strained. Electricity prices are rising. Utilities are scrambling to expand capacity.

And that’s where the real opportunity lies…

One little-known company—almost entirely overlooked by most AI investors—could be the ultimate backdoor play. It’s not a chipmaker. It’s not a cloud platform. But it might be the most important AI stock in the US owns critical energy infrastructure assets positioned to feed the coming AI energy spike.

As demand from AI data centers explodes, this company is gearing up to profit from the most valuable commodity in the digital age: electricity.

The “Toll Booth” Operator of the AI Energy Boom

  • It owns critical nuclear energy infrastructure assets, positioning it at the heart of America’s next-generation power strategy.
  • It’s one of the only global companies capable of executing large-scale, complex EPC (engineering, procurement, and construction) projects across oil, gas, renewable fuels, and industrial infrastructure.
  • It plays a pivotal role in U.S. LNG exportation—a sector about to explode under President Trump’s renewed “America First” energy doctrine.

Trump has made it clear: Europe and U.S. allies must buy American LNG.

And our company sits in the toll booth—collecting fees on every drop exported.

But that’s not all…

As Trump’s proposed tariffs push American manufacturers to bring their operations back home, this company will be first in line to rebuild, retrofit, and reengineer those facilities.

AI. Energy. Tariffs. Onshoring. This One Company Ties It All Together.

While the world is distracted by flashy AI tickers, a few smart investors are quietly scooping up shares of the one company powering it all from behind the scenes.

AI needs energy. Energy needs infrastructure.

And infrastructure needs a builder with experience, scale, and execution.

This company has its finger in every pie—and Wall Street is just starting to notice.

Wall Street is noticing this company also because it is quietly riding all of these tailwinds—without the sky-high valuation.

While most energy and utility firms are buried under mountains of debt and coughing up hefty interest payments just to appease bondholders…

This company is completely debt-free.

In fact, it’s sitting on a war chest of cash—equal to nearly one-third of its entire market cap.

It also owns a huge equity stake in another red-hot AI play, giving investors indirect exposure to multiple AI growth engines without paying a premium.

And here’s what the smart money has started whispering…

The Hedge Fund Secret That’s Starting to Leak Out

This stock is so off-the-radar, so absurdly undervalued, that some of the most secretive hedge fund managers in the world have begun pitching it at closed-door investment summits.

They’re sharing it quietly, away from the cameras, to rooms full of ultra-wealthy clients.

Why? Because excluding cash and investments, this company is trading at less than 7 times earnings.

And that’s for a business tied to:

  • The AI infrastructure supercycle
  • The onshoring boom driven by Trump-era tariffs
  • A surge in U.S. LNG exports
  • And a unique footprint in nuclear energy—the future of clean, reliable power

You simply won’t find another AI and energy stock this cheap… with this much upside.

This isn’t a hype stock. It’s not riding on hope.

It’s delivering real cash flows, owns critical infrastructure, and holds stakes in other major growth stories.

This is your chance to get in before the rockets take off!

Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.

AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.

The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.

As an investor, you want to be on the side of the winners, and AI is the winning ticket.

The Talent Pool is Overflowing: The world’s brightest minds are flocking to AI.

From computer scientists to mathematicians, the next generation of innovators is pouring its energy into this field.

This influx of talent guarantees a constant stream of groundbreaking ideas and rapid advancements.

By investing in AI, you’re essentially backing the future.

The future is powered by artificial intelligence, and the time to invest is NOW.

Don’t be a spectator in this technological revolution.

Dive into the AI gold rush and watch your portfolio soar alongside the brightest minds of our generation.

This isn’t just about making money – it’s about being part of the future.

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A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…