Benchmark analysts increased their price target on Tencent Music Entertainment Group (NYSE:TME) to $19 from $14 and maintained their Buy rating following the company’s reported Q1 earnings, which resulted in more than a 10% stock price surge yesterday.

The analysts highlighted that Tencent Music's first-quarter results for 2024 met all key metrics: the company saw strong subscriber growth in its music segment, adding a record 6.8 million net subscribers during the quarter. This growth was propelled by both subscription and advertising revenues. Additionally, there was significant gross profit margin (GPM) expansion both year-over-year (789 basis points) and quarter-over-quarter (263 basis points). The company also announced its decision to issue an annual dividend.

The analysts are optimistic about Tencent Music's continued growth in online music, driven by an enriched content library and the launch of innovative product offerings, including potential future benefits from generative AI technologies. This outlook led them to raise financial estimates for 2024 and 2025, and subsequently the price target to $19, reflecting an expected upward earnings revision and multiple expansion.