Tencent Music Shares Rise After Earnings Beat

By Tracy Qu

Tencent Music Entertainment shares rose sharply after quarterly earnings beat expectations, helped by strong growth in paid subscriptions.

Shares were 8.6% higher at 59.55 Hong Kong dollars (US$7.62) on Tuesday in Hong Kong, following an 11% gain overnight in U.S.-listed American depositary receipts.

The subsidiary of Chinese social media and gaming company Tencent on Monday posted a 24% year-over-year rise in first-quarter profit and a 3.4% drop in revenue, beating FactSet estimates in both cases. Gross profit margin rose to 41% from 33% a year ago, helped by strong revenue growth from music subscriptions and advertising services, while its number of paying users rose 20% from a year earlier, Tencent Music said.

Citi analysts led by Alicia Yap saw the solid first-quarter results beat as "stronger-than-expected," especially with the quarterly music subscriber net add and improved gross profit margin. The analysts keep a buy rating on the stock with a target price of US$13.00.

Daiwa analysts led by Candis Chan and John Choi said in a research note that they like "TME's earnings growth driven by its online music subscription." They now expect online music's gross margin to reach 45% in 2026, lifting their 2024-2026 gross margin estimates by 1.7-2.0 percentage point. Daiwa keeps a buy rating and raised its target price to HK$60.00 from HK$49.00.

Write to Tracy Qu at tracy.qu@wsj.com

(END) Dow Jones Newswires

May 13, 2024 23:57 ET (03:57 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.