Amid high hopes, Tencent gets ready for first quarterly report after US debut

After its much-anticipated debut in the US stock market, China-based music streaming service Tencent Music (TME) will be reporting its fourth-quarter earnings Tuesday after the closing bell. It is widely expected that the results would match the company’s outstanding performance in the earlier quarters.

On average, analysts covering the company expect earnings of $0.09 per share for the quarter on revenues of $786 million. Statistics show that the tech firm doubled its revenues to about $2 billion in the first three quarters of 2018, which resulted in a threefold surge in earnings.

The company started trading on the New York Stock Exchange in December last year, after a $1.1-billion IPO – the fourth largest by a Chinese firm. The debut came after a long delay due to the US-China trade war.

On average, analysts covering the company expect earnings of $0.09 per share for the quarter on revenues of $786 million

To Tencent’s advantage, in terms of future growth, the company currently has around 800 million monthly active users and owns the rights to over 20 million songs, through its popular music apps Kugou Music, QQ Music, and WeSing. Also, the company has tie-ups with several leading music labels such as Universal, Warner Music, and Sony.

The robust earnings growth in the past and other positive factors make the stock an investment option worth considering. Moreover, the strong cash position gives room for future expansion even as the company keeps pursuing strategic acquisitions.  Reflecting Wall Street’s upbeat outlook on Tencent, a number of brokerages recently initiated their coverage of the company with positive ratings. Most analysts have given it a buy rating, and the average price target is $17.

In 2018, the US bourses witnessed a rush of Chinese firms pursuing IPO, four years after the debut of Alibaba Group (BABA). Swedish music entertainment platform and arch-rival Spotify (SPOT) owns a 7.5% stake in Tencent. Last month, Spotify reported earnings of $0.41 per share for the fourth quarter, exceeding analysts’ forecast by a wide margin. The turnaround was supported by a 30% growth in revenues to $1.7 billion.

Since December 2018, when they started trading on the New York Stock Exchange, Tencent shares gained 23% and gathered further strength in the current year, adding about 35%.

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