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Why Tencent Music Entertainment Stock Climbed 13.2% Last Month

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

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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.

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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.


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.

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

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