- NetEase Inc (NTES) has been given a Buy rating by Benchmark analyst Fawne Jiang, who has raised the stock’s price target from $104 to $118.
- NetEase’s positive 1Q23 results led the way for the company’s re-rating.
- The growth in games in 1Q was driven by the excellent performance of Eggy Party and the resilience of legacy titles such as FWJ and Identify V.
- The analyst sees significant prospects for game growth in FY23, with several games such as Badlanders, Racing Master, and Justice Mobile slated for launch in June. Additionally, Harry Potter: Magic Awakened will be making its international debut this summer.
- NetEase has decided to focus on reducing losses and achieving cash flow breakeven, primarily in its non-game segments, including Cloud Music and Youdou, by purging low-profit products and services. This will result in a substantial upside in profitability, and the analyst has therefore raised the stock’s FY23 non-GAAP EPADS from $4.62 to $5.53.
- The performance of mobile games was strengthened by the great performance of Eggy Party and the resilience of legacy titles. The company plans to launch multiple games in June, including Badlanders, Racing Master, and Justice Mobile. In addition, Harry Potter: Magic Awakened will have its international debut this summer. The analyst has increased his FY23 game growth projection as a result of improved visibility on the games’ launch schedule and the early success of Eggy Party.
- Furthermore, faster game revenue would mean higher profitability. Therefore, the analyst raised his FY23 gross profit margin for online games.
- For NetEase’s non-game segments, such as Cloud Music and Youdou, the company has focused on high-quality growth by eliminating low-profit products and services, and reducing revenue sharing on social entertainment.
- Alicia Yap, a Citigroup analyst, has also given NetEase a Buy rating, raising the company’s price target from $115 to $118. UBS analyst Felix Liu maintains his Buy rating, with a raised price target from $112 to $113.
- On the last check Friday, NTES shares were trading higher by 5.56% at $90.50.
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