NetEase Stock Drops Following JPMorgan’s Comments
Shares of NetEase (NASDAQ:NTES) experienced a more than 8% drop in Hong Kong trading on Tuesday, following JPMorgan's comments regarding the underwhelming debut of the company’s latest game. In the U.S. premarket trading, NetEase shares saw a 2% decrease.
JPMorgan analysts highlighted that NetEase’s new release, Condor Heroes, ranks 21st among top-grossing games in China's iOS store, significantly lower than the expected top-five placement. The game received criticism from players for its combat system and graphics.
The analysts also mentioned the recent drop in NetEase's stock price as reflecting the market's reservations regarding its gaming performance for the first and second quarters.
In addition, analysts at Morgan Stanley adjusted their forecast for NetEase’s gaming revenue growth for the years 2023 to 2025 to a 10% compound annual growth rate (CAGR), down from an earlier projection of 14%. This adjustment was primarily due to the disappointing performance of Condor Heroes and monetization changes in FWJ PC.
| Symbol | Price | %chg |
|---|---|---|
| 259960.KS | 375000 | -1.07 |
| 7974.T | 11820 | -1.69 |
| 251270.KS | 51500 | 12.72 |
| 036570.KS | 148100 | 0.68 |
NetEase (NASDAQ:NTES) Faces Downturn but Shows Promising Future
- NetEase's stock value faced a downturn following its Q2 financial results, with a profit that fell short of market expectations despite an increase in video game revenue.
- Thomas Chong of Jefferies has set a new price target for NetEase at $103, suggesting a potential upside of approximately 25.23%.
- The company's strong position in the video game industry and efforts to diversify revenue streams are key factors for its potential success and recovery.
NetEase (NASDAQ:NTES), a prominent player in the global video game industry, recently faced a downturn in its stock value following the release of its second-quarter financial results. The company, known for its vast portfolio of online games and mobile applications, reported a profit that fell short of market expectations. This news came as a surprise to investors, especially considering the company's reported increase in video game revenue during the same period.
Despite the initial disappointment in NetEase's profit figures, the stock's future looks promising according to Thomas Chong of Jefferies. Chong has set a new price target for NetEase at $103, which is significantly higher than its current trading price of $82.25. This adjustment suggests a potential upside of approximately 25.23% for the stock. The new price target was announced on Thursday, August 22, 2024, and has been a topic of interest among investors and analysts alike.
The optimistic outlook from Jefferies highlights the confidence some analysts have in NetEase's ability to recover and grow in the coming months. The company's strong position in the video game industry, combined with its efforts to expand and diversify its revenue streams, could be key factors contributing to its potential success. The increase in video game revenue, despite the profit miss, indicates a robust demand for NetEase's products and services.
Investors and market watchers will be closely monitoring NetEase's performance in the wake of this new price target. The company's ability to address the issues that led to the second-quarter profit shortfall and capitalize on its strengths in the gaming sector will be crucial. With the backing of analysts like Thomas Chong and the potential for a 25.23% upside, NetEase's stock could be on the path to recovery and growth.
The adjustment in NetEase's price target by Jefferies, as reported by TheFly, serves as a significant indicator of the stock's potential. It reflects a broader sentiment that, despite short-term challenges, the long-term outlook for companies like NetEase in the tech and gaming industries remains positive. Investors will be keen to see if NetEase can leverage its video game revenue growth to overcome its recent profit challenges and achieve the projected stock price increase.
JPMorgan Bullish on NetEase for 2024
JPMorgan analysts maintained an Overweight rating on NetEase (NASDAQ:NTES) with an unchanged price target of $125.00, highlighting the company as a top pick in the China internet sector for 2024. Shares gained more than 7% intra-day today.
The analysts noted the company’s significant outperformance in 2023 where it saw a 31% increase compared to the KWEB's 9% decline. They anticipate this trend to continue into 2024, with the current price target suggesting a 36% upside for NetEase in the U.S. market.
NetEase's strong capabilities in game development are seen as a key driver for its success, enabling it to consistently introduce new and successful game titles globally and achieve double-digit game revenue growth since 2015. The analysts expect 2024 to be a major year for product releases at NetEase, with over five high-profile game titles in the pipeline. They are particularly optimistic about Naraka Mobile, anticipating it to perform similarly in revenue to Justice Mobile, and contributing to another year of double-digit game revenue growth (10% year-over-year) for 2024.
What to Expect From NetEase's Q3 Results?
Analysts at Nomura provided their outlook on upcoming NetEase's (NASDAQ:NTES) Q3 results, expecting a solid quarter, that will likely be a rare bright spot in an otherwise dull Q3 earnings season for the China internet space, that will likely be marked by sluggish growth and a cautious tone towards outlook.
According to the brokerage, the two new titles the company launched in July (Naraka Bladepoint) and September (Harry Potter) have both materially surpassed market expectations. The analysts believe the popularity of both the titles will be able to sustain, backed by the launch of a mobile and console version for Naraka Bladepoint and entry into the Japan market for Harry Potter early next year.
The brokerage anticipates 20%/38% year-over-year growth in the company’s Q3 consolidated revenue/non-GAAP operating profit which is 6%/8% above the consensus estimates.
