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Why Tencent Music Stock Rose 38% in January

By Demitri Kalogeropoulos - Feb 4, 2021 at 10:11AM

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Investors gained confidence in the Chinese music streamer's business last month.

What happened

Tencent Music (TME 1.99%) shareholders outperformed the market by a wide margin last month. Shares soared 38% in January compared to a 1% downtick in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally added to significant short-term gains for the Chinese music streamer, which rose over 60% in 2020.

A young woman streams music into headphones while lying in bed.

Image source: Getty Images.

So what

January's spike was supported by news that Tencent is acquiring Lazy Audio, a major player in both music and long-form streaming content including audio books. Wall Street pros cheered the purchase news and responded by boosting their short-term price targets on the stock.

Now what

Tencent is likely to report strong growth in its next earnings report, slated for early March. The pandemic, plus a continuing to shift toward subscription-based music delivery, helped push its paying user base up 46% in the prior period that ended in late September. That success allowed sales to rise 16%, and investors are expecting accelerating growth in the fourth quarter as revenue jumps 24%.

Management is hoping to add to that momentum in 2021 with help from a growing content portfolio that now includes niches like audio books and video.

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