Key Takeaways:
Goldman Sachs cut its price target on Tencent Music Entertainment Group (HKG: 1698, NYSE: TME) by over 14 percent, citing rising competition and potential disruption from artificial intelligence.
The bank's report noted that market concerns over a slowdown in its subscription business are intensifying, despite first-quarter results that were in line with expectations.
The price target for Hong Kong-listed shares was lowered to HKD 59 from HKD 69, while the target for its U.S. shares was cut to USD 15 from USD 17.6. Goldman also trimmed its 2026-2028 revenue forecasts for TME by 2 to 3 percent.
The downgrade highlights the challenge legacy streaming platforms face from new, price-competitive entrants like ByteDance-owned Douyin's Soda Music, which is causing price-sensitive users to churn.
Despite the target reduction, Goldman Sachs maintained its Buy rating. The bank pointed to strong momentum in the non-subscription business, where revenue grew 28 percent year-over-year in the first quarter, driven by offline concerts and advertising income.
TME’s commitment to return capital to shareholders through an existing USD 1 billion share repurchase mandate, which the company plans to extend, should provide downside support for the share price, the report added.
The bank acknowledged the ongoing debate about the impact of AI-generated music on the industry. In response to copyright and infringement issues, TME's management has reportedly stepped up efforts to address these challenges.
The target price cut suggests near-term growth headwinds for Tencent Music's core subscription model. Investors will be watching second-quarter results for signs of stabilization in user numbers and the continued growth of higher-margin advertising and live event revenue.
This article is for informational purposes only and does not constitute investment advice.
