Shares of Tencent Music Entertainment Group (TME) plunged over 6% in pre-market trading on Tuesday after Morgan Stanley downgraded the stock to Equal Weight from Overweight and slashed its price target to $13 from $15.
According to the research note, the analyst assumed primary competition from major music streaming peers like QQ Music and Kuwo Music would intensify, putting pressure on Tencent Music's market share and monetization capabilities. Concerns were also raised about the company's ability to achieve its previous growth estimates given the challenging macro environment.
The downgrade and lower price target reflect Morgan Stanley's subdued outlook for Tencent Music's business prospects. Investors reacted negatively to the bearish analyst call, sending TME stock sharply lower ahead of the market open.
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