The analyst rating from CCBI for Tencent Music Entertainment Group (TME.US) is based on several key factors:
1. Outperform Rating: CCBI believes that TME is positioned to perform better than the market average, indicating confidence in the company's future prospects.
2. Target Price: The target price of US$27.10 reflects a projected PE ratio of 28x for 2026, which is considered attractive as it represents a 40% discount compared to the global leader, Spotify (SPOT.US).
3. Recent Share Price Decline: The recent decline in TME's share price is viewed as a favorable entry point for investors, suggesting that the stock is undervalued at its current price.
4. Strong Financial Performance: TME-SW's 3Q25 revenue and non-GAAP net profit exceeded market expectations, indicating strong operational performance, particularly in non-subscription music services.
5. Future Investments: The company plans to continue investing in offline events and artist merchandise to enhance its integrated music ecosystem, which, while potentially pressuring profit margins in the short term, is expected to strengthen its market position in the long run.
Overall, the combination of a favorable valuation, strong recent performance, and strategic investments supports the Outperform rating.
