© Reuters.
On Wednesday, Citi upgraded shares of Tencent Music Leisure Group inventory (NYSE:) to Purchase from Impartial, with a brand new worth goal set at $13, a big improve from the earlier $9. The improve follows Tencent Music’s fourth quarter monetary outcomes for 2023, which exceeded expectations.
Tencent Music reported a year-over-year decline in complete income of seven.2% to RMB 6.89 billion, whereas adjusted web revenue rose by 12.5% to RMB 1.68 billion. These figures surpassed each Citi’s and the consensus estimates by 2.4%/2.9% and eight.2%/7.9% respectively.
The higher-than-anticipated outcomes have been primarily pushed by sturdy efficiency in on-line music revenues, which benefited from a slight improve in web additions and common income per paying person (ARPPU), improved promoting revenues, increased gross revenue margins, and decrease basic and administrative bills than anticipated.
Looking forward to the primary quarter of 2024 and the complete fiscal yr, Tencent Music’s administration has expressed optimism about reaching regular progress in music web additions and ARPPU. In addition they anticipate a optimistic outlook for promoting revenues and additional growth of gross margins, whereas results from social leisure are anticipated to stabilize or normalize.
Citi highlighted Tencent Music’s resilient subscription music enterprise and its increasing capabilities inside the music worth chain. The agency additionally famous the corporate’s efforts to extend long-form audio content material and diversify utilization throughout a number of channels and gadgets, that are seen as supportive of a sustained progress outlook.
Following the revision of estimates, Citi’s new worth goal of $13 is predicated on a 17 instances a number of, making use of a 1.0x price-to-earnings progress (PEG) ratio, and rolling ahead to the 2025 estimated earnings per share of $0.76. With an anticipated complete return of over 17%, the agency has raised its stance on Tencent Music’s inventory, reflecting a optimistic view on its future efficiency.
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