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Tencent Music’s Earnings Meet Expectations, Revenues Miss in Q2
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Tencent Music’s Earnings Meet Expectations, Revenues Miss in Q2

Shares of China-based online music and audio entertainment platform Tencent Music Entertainment Group (TME) was trading 3.4% lower at the time of writing on Tuesday after the company’s second-quarter 2021 revenues missed estimates. Tencent provides live music streaming services through its applications like WeSing, Kuwo Music, Kugou Music and QQ Music.

The company reported adjusted earnings per share (EPS) of $0.10, in line with the Street’s estimate. Total revenues increased 15.5% year-over-year to $1.24 billion, falling marginally short of analysts’ expectations of $1.26 billion.

Revenues from online music services rose 32.8% year-over-year to $457 million on the back of strong growth in advertising service revenues and music subscription revenues. Revenues from social entertainment services and others grew 7.4% to $783 million due to higher revenues from advertising and live streaming on social entertainment platforms.

The Executive Chairman of Tencent Music, Cussion Pang, said, “In the second quarter, we delivered steady growth overall. Our strong momentum in online music monetization was supported by solid subscriptions and advertising revenue growth, while social entertainment services continued to progress at a good pace. Our efforts to build a leading online music and audio entertainment ecosystem resulted in an over 90% year-over-year increase in long-form audio MAUs (monthly active users).”

Shares of the company tanked almost 9% to close at $8.92 on Monday. (See Tencent stock chart on TipRanks)

Last month, HSBC analyst Binnie Wong reiterated a Buy rating on the stock but reduced the price target to $22 from $26 (146.6% upside potential).

In a research note to investors, the analyst said, “Competition pressure from short video remains, and Tencent Music’s key platform Wesing is under product adjustment to add more social features and cater to young users’ appetites, likely leading to short-term fluctuations in active users and revenue.”

Overall, the stock has a Moderate Buy consensus based on 8 Buys and 6 Holds. The average Tencent Music Entertainment Group price target of $19.67 implies 120.5% upside potential. Shares have lost 66.5% over the past six months.

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