Tencent Music Plunged 12% Overnight: If Earnings Grew, What Spooked the Market?
Tencent Music Entertainment (TME) fell 11.92% yesterday to close at $8.72, after touching an intraday low of $8.21. At first glance, the company’s earnings did not appear weak enough to justify such a sharp sell-off. So why did the stock tumble nearly 12% following the results? In the second quarter, TME generated RMB 8.93 billion in revenue, up 5.8% year over year and above market expectations. Revenue from music-related services increased 11% to RMB 7.61 billion, while membership revenue rose 8.1% to RMB 4.79 billion. Non-IFRS net profit increased 4.4% to RMB 2.69 billion. The problem is that markets do not simply price whether a company is growing. They price whether that growth is strong enough to justify its valuation. 1. Ximalaya contributed significantly to headline growth Ximalaya
