New regulations in China have cut into the bull case for shares of Tencent Music Entertainment , according to JPMorgan. Analyst Alex Yao downgraded the stock to neutral from overweight, saying Thursday in a note to clients that new rules around livestreaming and a recent loss in an antitrust case will hold back the stock. The antitrust ruling will stop Tencent from building exclusive relationships with music labels, making life easier for competitors, Yao explained. "The verdict requires TME to remove all exclusive copyright agreements with copyright owners (music labels) within 30 days since the announcement," the JPMorgan note said. "TME cannot reach exclusive copyright agreements with copyright owners going forward. Exceptions include exclusive agreements with indie musicians (without contracts with music labels) and new song debut launches." For live streaming, new rules about tipping go into effect next year, which could be a significant hit to a key business for Tencent Music. "We estimate that live-streaming will represent 51%/28% of total revenue in 2021/25. As such, the financial impact of such a change in the regulatory environment is a too big risk to ignore, in our view," the note said. JPMorgan slashed its price target to $12 per share from $33. The new target is 14.8% above where the stock closed on Wednesday. —CNBC's Michael Bloom contributed to this report.
Mascots of Tencent Music Entertainment celebrate the company's IPO outside the New York Stock Exchange (NYSE) in New York, U.S., December 12, 2018.