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Netease's Diversified Games Portfolio Drives Strong Q3 Results, Analysts Bullish

By Don Francis, Editor
November 21, 2023 6:53 AM UTC
Netease's Diversified Games Portfolio Drives Strong Q3 Results, Analysts Bullish

Benchmark's Fawne Jiang raised their price target on Netease (NASDAQ: NTES) by 7.7% from $130 to $140 on 2023/11/17. The analyst maintained their Strong Buy rating on the stock.

Jiang's main takeaway from Netease's Q3 2023 earnings report, released on November 16, was a "strong beat on earnings." The analyst highlighted two notable structural trends recently emerging with respect to Netease's games. First, Netease has made a breakthrough into games with large user bases and high daily active user (DAU) counts. Second, they have found success in developing and launching titles across games genres beyond their core massively multiplayer online games (MMOs).

In Q3 2023, Netease reported impressive financials. Earnings per ADS came in at $1.84, surpassing the FactSet Consensus Estimate of $1.49 by 17.2% and exceeding Q3 2022's $1.57 by the same margin. The company also reported revenue of RMB 27.27 billion, representing an 11.36% increase over Q3 2022's RMB 24.43 billion. Additionally, Netease announced a quarterly dividend of $0.495 per ADS. The company demonstrated its commitment to shareholders by buying back 6.6 million ADSs year-to-date at a cost of $588 million under its $5 billion share repurchase program. Notably, management did not provide financial guidance in its press release or earnings presentation.

CEO William Ding expressed satisfaction with the strong results in Q3, attributing the robust performance to the company's diverse games portfolio. Ding emphasized the expanding reach in the casual gaming market and the company's ability to push boundaries in traditional MMOs, offering players new gaming experiences. He also highlighted the success of Netease's broader ventures, such as Cloud Music and Youdao, which are delivering innovative content offerings in their respective fields. Looking ahead, Ding emphasized the importance of creating products and content that invigorate the market and provide resonant experiences for users.

According to analysts, Netease is expected to deliver earnings per share (EPS) of $5.51 in the upcoming year. This forecast suggests a 3.1% decline in EPS on a year-over-year basis. Despite this projection, all top-rated analysts currently rate NTES as a Strong Buy or Buy, with no analysts recommending a Hold or selling the stock.

Since Netease's latest quarterly report on November 16, the stock price has increased by 4.3%. Year-over-year, the stock has seen a substantial rise of 65%. Netease has significantly outperformed the S&P 500, which has grown by 15.2% during the same period.

Fawne Jiang, the analyst behind the recent price target increase, is ranked in the top 22% of Wall Street analysts by WallStreetZen. With an average return of 1.9% and a win rate of 46%, Jiang specializes in the Industrials and Consumer Defensive sectors, among others.

NetEase, Inc. is a Chinese company that provides online services focusing on diverse content, community, communication, and commerce. The company operates in three segments: Online Game Services, Youdao, Cloud Music, and Innovative Businesses and Others. Netease develops and operates PC and mobile games, as well as offers licensed games from other developers. The company's products and services include various online tools, smart devices, online courses, streaming platforms, e-commerce, internet media, email services, and payment platforms.

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