Tencent Music Entertainment Group (TME): A Bull Case Theory

We came crossed a bullish thesis connected Tencent Music Entertainment Group connected Brandon’s Substack’s. In this article, we volition summarize the bulls’ thesis connected TME. Tencent Music Entertainment Group's stock was trading astatine $18.45 arsenic of November 28th. TME’s trailing and guardant P/E were 18.84 and 18.45 respectively according to Yahoo Finance.

Dolby, Music

Tencent Music Entertainment Group (NYSE: TME) is China’s starring euphony streaming platform, commanding implicit 70% marketplace stock done QQ Music, Kugou, Kuwo, and WeSing. The institution has successfully pivoted from a growth-at-all-costs subscriber exemplary to monetization, focusing connected ARPU uplift, premium SVIP subscriptions, and improving idiosyncratic quality. Online euphony services present lend implicit 75% of revenues, supported by favorable industry tailwinds arsenic China’s paid euphony penetration remains low astatine ~11% versus ~52% successful the West.

TME benefits from a fragmented rights landscape, enabling favorable licensing presumption with planetary majors and home labels, which underpin borderline resilience (FY20–FY24 GM 34.1%) relative to planetary peers similar Spotify. The company’s ecosystem integration with Tencent apps, societal engagement, and unsocial SVIP perks—including exclusive creator interactions, concerts, and merchandising—has strengthened user lock-in and driven accordant ARPU maturation (~10–15% YoY).

Management’s strategical XML acquisition, pending regulatory approval, could adhd 300M MAUs and grow long-form audio offerings, complementing TME’s bundled rank tiers and expanding monetization potential. While competitory pressures from Soda Music and Netease exist, the operation of superior euphony catalogue (~260M tracks), societal and fan-focused engagement, and sticky ecosystem effects mitigates switching risk.

TME’s 3Q25 results reinforced this trajectory, with gross up 20.6% YoY, ARPPU maturation to 11.9, and gross borderline expansion. Valuation connected a guardant P/E ground implies a 1-year people of US$20.9, offering ~11.7% upside. With robust SVIP-driven monetization, high-margin operations, and strategical initiatives successful instrumentality system and XML integration, TME presents a compelling risk/reward illustration successful a increasing Chinese integer euphony market.

Previously we covered a bullish thesis connected Spotify Technology S.A. by Kroker Equity Research successful April 2025, highlighting borderline expansion, pricing power, and beardown subscriber growth. The banal has appreciated astir 9.05% arsenic profitability execution improved. The thesis inactive holds arsenic operating leverage strengthens. Brandon shares a akin presumption but stresses TME’s ecosystem advantages and SVIP-driven monetization.