Shares of Tencent Music Entertainment ( TME ) rose 15.7% to $15.43 after releasing first-quarter earnings on Monday (May 13), which showed a net profit of 28% to $212 million as subscription revenue music revenues exceeded $500 million and the company's subscribers grew by 7 million to 113 million. Online music revenue rose 43% to $693 million, helping to offset a nearly 50% decline in social entertainment revenue to $244 million.
Many analysts raised their price targets for TME this week after the company's earnings announcement. Jefferies raised TME to $15.40 from $12.00. Mizuho raised its price target to $15.00 from $13.00. HSBC also raised TME to $15.00 from $13.00.
Another Chinese music streaming company, Cloud Music, jumped 11.7% to HKD105.00 this week after announcing a licensing deal with Kakao Entertainment for distribution in China. Kakao has over 50 “star” artists and 70,000 tracks, according to a press release announcing the pact. Cloud Music has not announced a date for its first quarter earnings release.
TME shares are up 97.6% over the past 52 weeks and have gained 71.3% in 2024. The company (which trades on the NYSE and Hong Kong) and Cloud Music (which trades on the Hong Kong Stock Exchange ) are part of a rally in Chinese stocks in 2024. After falling in January, the Shanghai Composite is up 15.5% since February 2 — far better than the gains of the FTSE 100 (10.6%), the S&P 500 (7.0%) and the Nasdaq composite (6.8). %) during this period.
TME has come a long way since being targeted by government regulators in 2021 for anti-competitive behaviour. Its shares traded below $5 for much of 2022 and fell as low as $3.14 in October of that year.
The Billboard 20 global music index rose 3.3 percent to a record 1,847.64, surpassing the previous high of 1,841.66 for the week ended April 5. While there were an equal number of winners and losers, the top three performers posted double-digit gains — Cumulus Media rose 18 percent — while the worst-performing stock, Sphere Entertainment Co., fell 8.1 percent. Most of the index's most valuable companies posted gains this week: Spotify rose 2.8% to $302.84, Universal Music Group rose 2.6% to 28.74 euros ($31.31). and Warner Music Group gained 1.3% to $32.04.
Music stocks beat many indexes. In the United States, the Nasdaq composite rose 2.1 percent to 16,685.97 and the S&P 500 gained 1.5 percent to 5,303.27. In the UK, the FTSE 100 fell 0.2% to 8,420.26 points. South Korea's KOSPI composite was down 0.1 percent at 2,724.62.
B. Riley maintained Reservoir Media coverage on Thursday (May 16) with “Buy” rating and $11 price target. Shares of Reservoir rose 0.2% to $8.40 this week. The company will announce first-quarter earnings on May 30.
Elsewhere, iHeartMedia fell 6.2% to $1.21 this week. Guggenheim cut its price target to $3 from $5 after the radio company's May 9 earnings report, which sent the stock down 36% last week. While Guggenheim maintained a “buy” rating, it dropped its price target to account for “core emissions headwinds,” analysts wrote in a May 15 note to investors.
Sphere Entertainment Co. it fell 8.1% to $36.07, bringing its year-over-year gain to 6.1%. The company announced on Monday that it has bought the remaining shares of Holoplot GmbH, the German company that provided the 3D sound technology for the Sphere in Las Vegas.
Outside the Billboard Global Music Index, JYP Entertainment fell 13.4 percent to 60,000 won ($44.30) after the company reported first-quarter earnings after markets closed on May 10. Revenue rose 15.6% to 136.5 billion won ($100 million) but operationally. Profit fell 20 percent to 33.6 billion won ($24.8 million) and net profit fell 26.3 percent to 31.4 billion won ($23.2 million). Operating profit and net profit decreased due to increases in artist fees, labor costs and supplies at JYP Three Sixty, the company's businesses that produce merchandise and license artists' intellectual property.
Another off-index stock, Sony Corp., rose 11.1% to $83.74 after reporting fourth-quarter earnings on Tuesday (May 14). Driven by subscription stream growth and helped by foreign exchange, Sony Music's yen-denominated revenue rose 23.5% to $2.85 billion in the quarter, and the music division was the parent company's biggest contributor to operating income.
