Why Tencent Music Entertainment Shares Are Up Sharply

Tencent Music Entertainment Group (NYSE:TME) is the biggest online music platform in China. It is often compared with Sweden-based Spotify Technology. TME operates famous streaming apps including QQ Music, KuGou Music, and Kuwo Music, bedside karaoke app WeSing. The company went public in December 2018 after selling its shares at $13 for total proceeds of around $1.1 billion.

TME stock has performed well since going public. Its market value has grown from around $21 billion at the time of IPO to approx. $44.9 billion in January 2021, translating to an increase of about two-folds in just over two years. Though, much of that growth came during the second half of 2020.

If we look at the financial performance, the company reported better-than-expected results in its previous quarterly report as paid subscribers increased during the September quarter. TME posted earnings of 0.80 yuan per ADS, above the consensus forecast of 0.71 yuan per ADS. Revenue came in at 7.58 billion yuan, versus 6.51 billion yuan in the comparable period of 2019. Moreover, paid subscribers in the quarter climbed 47 percent on a year-over-year basis to 51.7 million.

TME stock once again caught investors’ attention on Tuesday after shares skyrocketed nearly 21 percent. The latest surge follows the company’s recent disclosure that it has acquired audio entertainment firm Lazy Audio in a transaction valued at 2.7 billion yuan. The acquisition will help TME to expand its content library and bring more paid users on the platform.

Meanwhile, a couple of research firms also upgraded Tencent Music stock after the announcement. Citi analyst Alicia Yap raised her price target for TME stock from $19 per share to $26 per share, while Oppenheimer analyst Bo Pei set a price target of $28 per share. TME stock has already surged about 36 percent so far this year.