NetEase Earnings: Lifting Fair Value 3% to $150 on Potential Activision Blizzard Reconciliation

We're increasing our fair value estimate for narrow-moat NetEase to $150 from $146 after incorporating our assumption of a re-engagement with Activision Blizzard starting in 2024. The company’s third-quarter earnings exceeded our and Refinitiv consensus expectations as of Nov. 16, thanks to impressive margins. ADRs went down 2% during U.S. trading on the news of the CFO's resignation for personal reasons. While we were surprised by the move, we do not expect Charles Yang’s departure to have a negative impact on NetEase’s business. We continue to view NetEase’s current stock price as attractive, with the shares trading at 17 times 2024 P/E.