Tencent Music Entertainment Group Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
It's been a good week for Tencent Music Entertainment Group (NYSE:TME) shareholders, because the company has just released its latest third-quarter results, and the shares gained 4.7% to US$15.99. It looks like a credible result overall - although revenues of CN¥7.6b were in line with what the analysts predicted, Tencent Music Entertainment Group surprised by delivering a statutory profit of CN¥0.67 per share, a notable 17% above expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
See our latest analysis for Tencent Music Entertainment Group
Following the latest results, Tencent Music Entertainment Group's 22 analysts are now forecasting revenues of CN¥35.4b in 2021. This would be a substantial 26% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 33% to CN¥3.20. Before this earnings report, the analysts had been forecasting revenues of CN¥35.7b and earnings per share (EPS) of CN¥3.16 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of CN¥122, showing that the business is executing well and in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Tencent Music Entertainment Group at CN¥20.55 per share, while the most bearish prices it at CN¥14.80. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Tencent Music Entertainment Group's revenue growth will slow down substantially, with revenues next year expected to grow 26%, compared to a historical growth rate of 33% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 15% next year. So it's pretty clear that, while Tencent Music Entertainment Group's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Tencent Music Entertainment Group going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Tencent Music Entertainment Group that you need to take into consideration.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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