Today marks the one-year anniversary of the end of the 33-day bear market triggered by the coronavirus pandemic from February 19, 2020 through March 23, 2020.
Since the March 2020 lows, the broader indices have all trekked back to all-time highs. The S&P 500 and Dow are both up 72% in the past 12 months.
Technology and small-cap stocks have led the rebound off the lows, as the NASDAQ has rallied 95% and the Russell 2000 has surged an incredible 119% in the past year.
Video chat apps and telehealth services have allowed many of us to work from home and stay connected with our healthcare providers, while online video games and streaming entertainment are keeping us occupied while we hunker down in our homes.
So, it’s not surprising that in my constant search for fundamentally superior stocks, some of my recommendations with the most profit potential hail from the technology sectors meeting this rising demand.
Case in point: Tencent Music Entertainment Group (TME), the leading online music entertainment platform in China.
I added TME to my Accelerated Profits Buy List back in January, after the company unveiled a very strategic acquisition that will even further extend the company’s reach into the audio entertainment industry in China — and, of course, add nicely to its top and bottom lines.
Back in 2003, TME launched its first online music platform in China. Over the next 17 years, the company introduced several online music and social platforms dedicated to music, including four incredibly popular music apps: QQ Music, Kugou Music, Kuwo Music and WeSing. More than 800 million people utilize these apps for their music and entertainment needs.
What makes Tencent Music Entertainment Group’s apps unique is that it’s not just for finding and listening to music. Sure, the company offers a massive music library with a wide selection of albums and live music that is both available in audio and video formats, including more than 30 million tracks. But it also offers a more social aspect to music that allows folks to generate their own content from singing karaoke with friends to recording their own musical performances.
As you can imagine, these apps have been utilized a lot in the past year as the global pandemic limited live concerts, karaoke nights at the club with friends and live mic nights for upcoming artists.
A Strong Performance
Following the closing bell on Monday, Tencent Music Entertainment Group reported that a “strong performance in online music services” drove the company’s results in the fourth quarter and full-year 2020.
In fact, during the fourth quarter, the company achieved a total of 56 million online music paying customers, which represented a 40.4% year-over-year increase.
Fourth-quarter revenue grew 14.3% year-over-year to RMB8.34 million, with revenue from online music subscriptions accounting for RMB1.58 billion. In U.S. dollar terms, TME reported earnings per ADS of $0.12 and revenue of $1.28 billion, which was in line with analysts’ earnings and revenue forecasts.
For fiscal year 2020, TME announced earnings per ADS of $0.45 and revenue of $4.47 billion. Online music service revenue accounted for $1.43 billion, and music subscription revenue came in at $852 million. These results were also in line with analysts’ expectations.
The company has also continued to expand its music offerings. In late January, TME added an extra 10% equity stake in Universal Music Group as part of a consortium of investors. Universal Music Group is a world leader in music-based entertainment, with content spanning more than 60 countries.
This morning, TME announced it’s formed a third new joint label with Warner Music Group. TME now has similar deals with all three major record label companies, which also include Universal Music Group and Sony Music Entertainment.
The company also recently revealed it’s extending its reach outside of the music market to also include other audio content like podcasts, radio shows, Chinese comedy skits and audiobooks. The company plans to acquire Shenzhen Lanren Online Technology Co, Ltd for RMB2.7 billion, or $17 million. The deal is expected to close in the first half of 2021.
The company’s blitz of deal-making and strong performance certainly has the market interested. The stock soared to a new all time high this morning.
And according to my Portfolio Grader, TME is a “Strong Buy” with a Total Grade of “A” and a Quantitative Grade of “A,” which represents institutional buying pressure under the stock.
Continue Investing in the Crème de la Crème
I have more than 100 stocks across all my services to choose from, and as a Platinum Growth Club subscriber, you have full access to each and every one.
Of course, you don’t have to invest in all 100+ stocks. If you’d rather start small, I’ve got you covered there, too. My Platinum Growth Club service comes with my exclusive Model Portfolio. I handpick all of my Model Portfolio recommendations from my different stock services – Growth Investor, Breakthrough Stocks and Accelerated Profits – so you can rest assured that you’re always invested in the crème de la crème.
I fully expect this strength to continue, as these stocks are well-positioned to benefit from quarter-end window dressing. This is when institutional investors and ETF managers shore up their portfolios, making them “pretty” for their clients before the end of the quarter. To do this, they’ll scoop up top-performing, fundamentally superior stocks, which, in turn, creates forced buying pressure under the best stocks.
In addition, the analyst community tends to revise their earnings estimates for the first quarter in late March and early April as the first-quarter earnings announcement season begins in mid-April.
So, now is a great time to join me here at Platinum Growth Club so your portfolio is “locked and loaded.”
The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Tencent Music Entertainment Group (TME)