UBS expects Tencent Music's paying user base to jump to 125M in 2025, upgrades to Buy

UBS upgraded Tencent Music Entertainment (NYSE:TME) to Buy from Neutral with a price target of $10.50.

Brokerage's PT represents a premium of over 22% to TME's last close. The company's shares rose 4.3% in early trading.

Analysts at UBS are bullish on TME's ability to raise average revenue per paying user [ARPPU] and subscriber numbers, as they have seen a limited impact on user growth for global peers that have increased prices since late 2022.

The investment firm expects ARPPU to jump to RMB11.7 in 2025 from RMB10.3 in Q3 2023, as the company starts to see the benefits from lower discounts and subscription price hikes.

UBS sees TME's paying user base to jump to 125 million in 2025 from 103 million in Q3 2023, helped by an improving paywall ratio and better operational strategies.

The brokerage forecasts 20% revenue CAGR in 2023-2025 for Tencent Music Entertainment's (TME) online music.