Tencent Music Entertainment hits 4-month low after revenue declines again in 4Q

By Geoffrey Smith

Investing.com -- Tencent Music (NYSE:TME) stock fell sharply in early trading in New York on Tuesday after the Chinese music streaming company reported another quarter of falling revenue, casting doubt over its ability to monetize what ought to be a strong position in the Chinese market.

TME said revenue fell 2.4% to CNY 7.43 billion ($1 = CNY 6.8759) in the three months through December, although a rise in paying subscriber numbers and a modest recovery in advertising helped it to double its operating profit from a year earlier to CNY 1.39B. Adjusted earnings per share came in at 72c, some 10% short of expectations according to analysts polled by Investing.com.

TME ADRs fell as much as 13% in the opening hour of trading in response, amid fears of a further decline in revenue in the current quarter due to lingering impacts from COVID-19-related lockdowns on its social entertainment division.

The importance of social entertainment to TME is slowly declining and the company said it expects revenue from online streaming to surpass it in revenue sometime this year.

It also said it expects to return to revenue growth this year and to post a larger profit than in 2022 when net income rose by just under 20% to CNY 3.84B.

In addition to the results, the company also confirmed the start of a new $500 million buyback program to follow last year's $1B buyback.

Analysts at Citigroup said the numbers were largely as expected, with the net addition of 3.2 million paying music subscribers in the quarter coming in slightly ahead of expectations.

By 10:55 ET (14:55 GMT), Tencent stock was down 11.6% at its lowest in nearly four months.