What Comes Next For Tencent Music After A 62% Slide

If you backed Tencent Music Entertainment Group for its fan economy story and smartphone tailwinds, the recent outcome would have been jarring. Holding Tencent Music Entertainment Group over the past year would have meant a 61.7% loss, including dividends. If you were weighing that decision on 9 October 2025, with analysts split between bullish digital growth and stricter rules plus margin pressure, which specific assumptions about user monetization, regulation, or offline events did the original case fail to allow for?

The easy part of this move is behind Tencent Music Entertainment Group. Zero in on 28 high quality undervalued stocks for companies trading below our estimates.

The Two Tencent Music Entertainment Group Stories Investors Were Weighing

The shares cost US$23.46 at the start of the period, and investors in Tencent Music Entertainment Group had to choose which future they trusted more.

The bullish story pointed to a Fair Value of US$28.34, a price implied by expectations of 14.8% annual revenue growth and a future P/E of 29.8x supported by a growing fan economy and offline expansion.

The bearish narrative suggested a Fair Value of US$14.54 based on tighter Chinese regulation, 8.5% revenue growth, and profit margins declining toward 26.2% as competition and compliance costs bit harder.

What The Results Changed For Tencent Music Entertainment Group

The completed US$2.4b Ximalaya acquisition and Q2 2026 revenue of RMB 8.93b, up from RMB 8.44b in Q2 2025, broadly backed the Tencent Music bullish focus on a larger fan and audio ecosystem. Net income also rose to RMB 2.47b, although net margin slipped from 28.5% to 27.7%, so the profitability leg of the optimistic case stayed unproven.

The takeaway is simple. When a thesis leans on richer user monetization, track both absolute profit and margin together rather than just top-line growth or new products.

What Tencent Music’s Lower Share Price Now Asks You To Believe

Tencent Music Entertainment Group now trades at US$8.38, after a one year return that declined 61.7%. The selected Narrative’s Fair Value sits above the current price, framed around stronger user engagement, broader fan spending, and benefits from recent buybacks.

For that higher figure to be reached, a buyer today would need to believe Tencent Music can keep growing paying subscribers and average spend per user while holding margins broadly steady.

"The company is effectively capitalizing on shifting consumer preferences toward digital media through continuous innovation such as enhanced SVIP features, artist-centric privileges, and bundled offerings (for example, "bubble" for fan engagement), which improve user stickiness, conversion, and recurring revenue. Strategic expansion into offline performances, artist merchandise, and cross-platform artist-fan interactions diversifies revenue streams and leverages the evolving "fan economy", creating incremental revenue opportunities beyond traditional streaming while enhancing the company's resilience and brand power."

That disagreement has a full argument behind it. → Uncover the higher Fair Value this Narrative argues for

Another Way To Stream Fans

Tencent Music shows how powerful fan attention can be when it finally pays.

Step one away and you find a different gatekeeper. This business turns that same attention into advertising slots and subscription screens.

Its tools help brands reach people searching, watching clips, and using everyday online services. The same fan who buys digital badges on Tencent Music might also watch music videos or concerts there.

As creators, studios, and artists chase reach across platforms, that ad funded and subscription based ecosystem could shape where the next marketing dollar goes.

That argument has a Narrative and a number behind it. → See the company one Narrative values 23% above its price

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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