Yahoo Finance China’s NetEase to Post Revenue Growth of About 18% in Q1
NetEase, a Chinese internet technology company, is expected to report its first-quarter revenue of CNY20.084 billion, which represents year-over-year growth of about 18% from CNY17.06 billion seen in the same period a year ago.
But the Hangzhou, Zhejiang-based company earnings would fall about 3% to CNY6.25 per share from CNY6.43 per share a year ago. In the last four consecutive quarters, on average, the mobile gaming giant has delivered an earnings surprise of over 31%.
The U.S. listed NetEase stock rose over 9% so far this year.
Analyst Comments
“Our 1Q21 estimates are a tad below consensus (high-base in 9M21) but we expect upcoming 520 game event and nearer game launches to act as positive catalysts. Games P/E of 17-18x 2022E is cheaper than most global peers,” noted Alex Poon, equity analyst at Morgan Stanley.
“NetEase is the second-largest game developer in China, with a proven track record of developing top-tier and long-lasting franchises. Its game portfolio has diversified both geographically and in terms of genres since 2017. Revenue concentration has dropped from 80% from its top 5 games two to three years ago to 10-20 games at present. We expect strong game revenue growth to continue in 2021, driven by flagship titles and upcoming new launches of global IPs, including Harry Potter, Diablo and Lord of the Rings. We think the music business is the hidden gem among non-gaming segments. Revenue rose >100% YoY in 2020. The company has announced an IPO plan for the business in the future.”
NetEase Price Forecast
Eight analysts who offered stock ratings for NetEase in the last three months forecast the average price in 12 months of $130.80 with a high forecast of $150.00 and a low forecast of $101.00.
The average price target represents a 24.69% increase from the last price of $104.90. Of those eight analysts, six rated “Buy”, one rated “Hold” while one rated “Sell”, according to Tipranks.
Morgan Stanley gave the base target price to $150 with a high of $194 under a bull scenario and $85 under the worst-case scenario. The firm gave an “Overweight” rating on the Chinese Internet technology company’s stock.
Several other analysts have also updated their stock outlook. Citigroup raised the stock price forecast to $151 from $148. Benchmark lifted the target price to $140. HSBC upped the target price to $140 from $110.
Upside and Downside Risks
Risks to Upside: 1) Stronger-than-expected growth of online tutoring business. 2) Greater-than-expected popularity of new products and new class formats. 3) Better-than-expected smart hardware sales. 4) Easing online competition – highlighted by Morgan Stanley.
Risks to Downside: 1) Relatively high concentration of top teachers’ revenue contribution. 2) Higher spend on customer acquisitions. 3) Less effective MAU conversion. 4) Fierce competition. 5) Slower-than-expected retention/conversion rates.
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This article was originally posted on FX Empire
