Tencent Music Entertainment Group (TME): A Bull Case Theory 

We came across a bullish thesis on Tencent Music Entertainment Group on Brandon’s Substack’s. In this article, we will summarize the bulls’ thesis on TME. Tencent Music Entertainment Group’s share was trading at $18.45 as of November 28th. TME’s trailing and forward P/E were 18.84 and 18.45 respectively according to Yahoo Finance.

Tencent Music Entertainment Group (NYSE: TME) is China’s leading music streaming platform, commanding over 70% market share through QQ Music, Kugou, Kuwo, and WeSing. The company has successfully pivoted from a growth-at-all-costs subscriber model to monetization, focusing on ARPU uplift, premium SVIP subscriptions, and improving user quality. Online music services now contribute over 75% of revenues, supported by favorable industry tailwinds as China’s paid music penetration remains low at ~11% versus ~52% in the West.

TME benefits from a fragmented rights landscape, enabling favorable licensing terms with global majors and domestic labels, which underpin margin resilience (FY20–FY24 GM 34.1%) relative to global peers like Spotify. The company’s ecosystem integration with Tencent apps, social engagement, and unique SVIP perks—including exclusive artist interactions, concerts, and merchandising—has strengthened consumer lock-in and driven consistent ARPU growth (~10–15% YoY).

Management’s strategic XML acquisition, pending regulatory approval, could add 300M MAUs and expand long-form audio offerings, complementing TME’s bundled membership tiers and increasing monetization potential. While competitive pressures from Soda Music and Netease exist, the combination of superior music catalogue (~260M tracks), social and fan-focused engagement, and sticky ecosystem effects mitigates switching risk.

TME’s 3Q25 results reinforced this trajectory, with revenue up 20.6% YoY, ARPPU growth to 11.9, and gross margin expansion. Valuation on a forward P/E basis implies a 1-year target of US$20.9, offering ~11.7% upside. With robust SVIP-driven monetization, high-margin operations, and strategic initiatives in fan economy and XML integration, TME presents a compelling risk/reward profile in a growing Chinese digital music market.

Previously we covered a bullish thesis on Spotify Technology S.A. by Kroker Equity Research in April 2025, highlighting margin expansion, pricing power, and strong subscriber growth. The stock has appreciated about 9.05% as profitability execution improved. The thesis still holds as operating leverage strengthens. Brandon shares a similar view but stresses TME’s ecosystem advantages and SVIP-driven monetization.

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Disclosure: None.