Please ensure Javascript is enabled for purposes of website accessibility

Why Tencent Music Entertainment Stock Climbed 13.2% Last Month

By Keith Noonan – Jun 6, 2020 at 10:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares are up roughly 4% year to date, but they still trade down roughly 6% from their December IPO.

What happened

Shares of Tencent Music (TME -1.89%) gained 13.2% in May, according to data from S&P Global Market Intelligence. The stock benefited from momentum in the broader market and got a boost after the company published first quarter results.

^SPX Chart

^SPX data by YCharts

Image source: YCharts.

Tencent Music released its first quarter results on May 11, posting sales that missed the market's target and earnings that came in ahead of expectations. The company posted non-GAAP (adjusted) earnings per share of $0.09 on revenue of $891 million, while the average analyst target had called for per-share earnings of $0.08 on sales of $903.4 million.

Headphones.

Image source: Getty Images.

So what

Tencent Music's online paying user base climbed 50.4% year over year in the first quarter to hit 42.7 million, and average revenue per paying user (ARPPU) rose 13.3% compared to the prior-year period. Online music subscription revenue climbed 70% year over year to hit $170 million and comprise roughly 19.1% of total sales for the period.

Total online music revenue for the period came in at $289 million, or roughly 32.4% of revenue. Meanwhile, revenue for Tencent Music's social entertainment services climbed roughly 3.3% year over year to $603 million, with an 18.5% increase for the company's paying user base being partially offset by a 12.9% decline for ARPPU. 

Now what

Tencent Music stock has has lost some ground in June. Shares are down roughly 5% in the month so far, despite momentum for the broader market. 

^SPX Chart

^SPX data by YCharts

Image source: YCharts.

Management didn't break out detailed guidance for the second quarter, but executives on the company's first quarter conference call noted that they were seeing improving conditions for the social entertainment segment.

Tencent Music Group trades at roughly 31 times the average analyst target for this year's earnings and 4.9 times expected sales.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tencent Music Entertainment Group Stock Quote
Tencent Music Entertainment Group
TME
$4.15 (-1.89%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.