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Recent share performance and context
Tencent Music Entertainment Group (TME) has drawn attention after a challenging stretch for the share price, with negative moves over the past week, month, past 3 months, and year to date.
At a last close of US$9.10 and a market value of about US$14.3b, the China-focused music streaming and social entertainment business combines QQ Music, Kugou Music, Kuwo Music and WeSing, alongside advertising and merchandise revenue.
See our latest analysis for Tencent Music Entertainment Group.
Those recent weekly and monthly share price declines sit alongside a 90 day share price return of 45.0% decline and a year to date share price return of 49.1% decline. The 3 year total shareholder return of 30.4% rise contrasts with a 40.7% decline over 5 years, suggesting momentum has faded again after a stronger medium term stretch.
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With Tencent Music reporting 9.1% annual revenue growth, 5.7% net income growth and an intrinsic value estimate suggesting a 38.5% discount, investors may be wondering whether the recent weakness represents a potential opportunity or whether the market is already accounting for future growth expectations.
Most Popular Narrative: 48.3% Undervalued
Compared with the last close at $9.10, the most followed narrative pegs Tencent Music Entertainment Group’s fair value at $17.59, using a 9.8% discount rate to frame long term potential.
Proprietary content development, exclusive partnerships (with Korean labels and Chinese artists), and investments in original artist incubation strengthen content differentiation, support premium pricing, and reduce long-term content costs, contributing to higher gross margins and defensible market share.
Curious what kind of revenue path and margin profile could justify almost double the current share price? The full narrative spells out the growth, profitability and valuation assumptions that underpin this fair value call.
Result: Fair Value of $17.59 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, this upside story could be knocked off course if regulatory pressure in China tightens further, or if lower margin offline events drag on Tencent Music’s profitability.
