Tencent Music Shares Drop on Weaker Sales, Guidance

By Jiahui Huang

Tencent Music Entertainment shares slid in Hong Kong, on track for their largest-ever one-day drop after the Chinese music streaming giant posted lower quarterly sales and guided for weaker-than-expected subscriber growth.

Shares of the Shenzhen-based company fell 18% early Wednesday to 44.10 Hong Kong dollars ($5.66), paring gains this year to around 33%. Its American depositary receipts closed 15% lower overnight.

The unit of tech giant Tencent said Tuesday that its second-quarter revenue dropped 1.7% on the year to 7.16 billion yuan, equivalent to about US$1 billion, mainly due to lower earnings from social-entertainment services. It attributed that to changes in its live-streaming functions and increased competition from other platforms.

Revenue from online music services rose during the quarter.

The company said it expects new subscriber numbers to fall sequentially in the second half of the year, and for music subscription revenue growth to soften, which Daiwa analysts think likely have dragged the shared down overnight on Wall Street, wrote in a note.

Daiwa downgraded their rating on Tencent Music to a hold from buy, attributing the stock's slide to a softer-than-expected forecast for music subscription revenue growth.

The downward revisions in subscription and social entertainment revenues may further drag the company's earnings over 2025 and 2026, the analysts added.

Tencent Music has around 117 million paid subscribers for online music services worldwide, according to the earnings report, making it the second-largest music streaming company by paying users behind Spotify.

Tencent is scheduled to report earnings for the second quarter later today.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

August 13, 2024 23:47 ET (03:47 GMT)

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