Tencent Music’s label exclusivity in danger, share drops 4% – Report
Tencent Music Entertainment (TME) may need to end the type of arrangements that have made it more competitive in the music streaming industry. According to a Reuters report citing confidential sources, the Chinese competition regulator plans to order Tencent Music to end exclusivity agreements with music labels. TME stock fell 4.19% on Monday to close at $ 12.34.
Tencent Music has sought exclusivity deals with music labels such as Warner Music Group (WMG), Sony Music Group (SONY) and Universal Music Group (UMG) to keep it one step ahead of its competitors. Now it risks losing exclusive rights to music labels at a time when it also faces growing competitive challenges from ByteDance, TikTok’s parent company in China. (See Tencent Music stock charts on TipRanks).
In addition to the music exclusivity order, the Chinese antitrust regulator also plans to impose a fine of 500,000 yuan ($ 77,150) on Tencent Music, according to the report. The sanction relates to the company’s failure to properly report its acquisitions of the Kuwo and Kugou apps for antitrust review. The regulator had previously considered forcing Tencent Music to sell the apps.
HSBC Analyst Binnie wong recently reiterated a buy note on Tencent Music stock, but lowered the price target to $ 22 from $ 26. Wong’s new price target still implies a potential upside of 78.28%.
The analyst observes that “soft social entertainment” faces increasing pressure in the short term, citing competition from short videos. Additionally, Wong notes that with Tencent Music’s Wesing platform being adjusted to make it more attractive to young users, there may be short-term fluctuations in income.
The consensus among analysts is a strong buy based on 11 buys and 3 takes. the Tencent Music’s average price target of $ 22.40 implies an upside potential of 81.52% from current levels.
According to TipRanks Hedge fund trading activity tool, confidence in TME is currently neutral. The cumulative change in holdings in the seven active funds during the last quarter represented an increase of 11.7 million shares.