Just weeks after Tencent Music's belated IPO on the New York Stock Exchange, JPMorgan has given a strong endorsement to the Chinese Music streamer, moving it from hold to buy with a $16.00 target price. Tencent Music closed Friday trading at $14.35, up 10.6% on the news.
JPMorgan analyst Alex Yao believes Tencent Music is "one of the most sustainable growth names in his coverage universe," reports The Fly. "The company is the largest online music streaming operator globally, with a 'China-unique revenue model,' Yao tells investors in a research note. He sees 'sizable; long-term growth potential for Tencent Music."
Tencent Music is profitable, in large part because its more than just a streaming music service. Socal video, online karaoke app WeSing and other social apps account for 75% of Tencent Music's revenue.
"By putting social centre stage, TME is able to monetise social in a way that would make Facebook green with envy," says MIDiAS analyst Mark Mulligan.
As TME explained in a filing:
“We provide to our users certain subscription packages, which entitle paying subscribers a fixed amount of non-accumulating downloads per month and unlimited “ad-free” streaming of our full music content offerings with certain privilege features on our music platforms.
We sell virtual gifts to users on our online karaoke and live streaming platforms. The virtual gifts are sold to users at different specified prices as pre-determined by us.”