Tencent Music’s Stock Won’t Rally Until These 3 Things Happen

Tencent Music Entertainment (NYSE: TME), the top music streaming company in China, went public in late 2018 and its stock currently trades nearly 20% above its IPO price. That's a decent return, but its Swedish counterpart Spotify (NYSE: SPOT) has nearly doubled in value since its direct listing in early 2018.

Back in June, I explained why investors favored Spotify over Tencent Music: Spotify generated stronger growth in revenue and paid users, operated a simpler business model that didn't rely on live videos, and faced fewer regulatory challenges than Tencent Music.

Tencent Music's recent second-quarter earnings report didn't bring back the bulls. The company's revenue rose 18% annually to 6.93 billion yuan ($981 million), but missed expectations by $1.5 million. Its non-GAAP net income rose 2% to 1.15 billion ($163 million), or $0.10 per ADS -- which beat estimates by a penny. Those headline numbers were solid, but Tencent Music's stock probably won't generate Spotify-like returns until three things happen.

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Source Fool.com