The CAPE (Cyclically Adjusted Price to Earnings) ratio is currently at 29 for the S&P 500 vs. The CSI 300 index is now down almost 30% from its 2018 high back in January. The Chinese Risk & OpportunityĬhinese Internet equities have suffered through most of 2018. Source: Spotify Q2 Earnings and Tencent Music Form F-1. I wouldn't be surprised if TME is more than three times the market cap of SPOT within the next three years. These two companies should not have the same valuation because they have widely different prospects and optionality. Tencent Music is a multi-apps social ecosystem, using exclusive content as a gateway and monetizing exclusive direct-to-fan and live-streaming content with the kind of ARPPU only seen in the video game industry.Spotify is already a 10-year old pure-play online music service with little innovation since its launch and limited features.Spotify is to Tencent Music what Snapchat ( SNAP) is to Facebook ( FB): Yet, they almost have the same valuation today of around $20 billion. Two companies of the online music services industry have become public in 2018: the Swedish company Spotify ( NYSE: SPOT) and the China-based Tencent Music Entertainment ( NYSE: TME), a spin-off of Tencent Holdings ( OTCPK:TCEHY), the social media behemoth behind WeChat and most of the biggest video games in the world.ĭespite the fact that they technically belong to the same industry, there are significant differences between Spotify and Tencent Music.
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