Morningstar

NetEase Inc ADR NTES

Morningstar Rating
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Stock XNAS Rating as of
$93.58 +2.45 (2.69%)
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As of Delayed Price Pre-Open: $93.58 0.00

Company Report

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NetEase Earnings: Investors Overreact to Temporary Gaming Slowdown

Ivan Su

Narrow-moat NetEase’s second-quarter results were mixed with slightly lower revenue yet higher operating income compared with our estimates. Concerns about the near-term outlook were sparked by slowing game revenue and mid-single-digit deferred income growth, as evidenced by a more than 10% decline in share price during US trading. However, we view this reaction as shortsighted, overly fixated on minor fluctuations in near-term revenue. In our view, NetEase's commitment and patience in developing next-generation games will yield substantial rewards over time. We anticipate that the upcoming release of Where Winds Meet will be a commercial success and a significant driver of growth in 2025 and beyond. Overall, we maintain NetEase’s fair value estimate at $158 (HKD 246) and consider the shares as undervalued.

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Price vs Fair Value

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NTES is trading at a 170% premium.
Price
$93.58
Fair Value
$532.00
Uncertainty
High
1-Star Price
$373.30
5-Star Price
$64.20
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

NetEase’s expertise in asymmetric multiplayer (Identity V and Dead by Daylight) would allow it to capitalize on future opportunities in this genre.

Bears

Leadership changes at Activision Blizzard can further delay the launch of much anticipated Diablo Immortal.

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News

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Trading Information

Previous Close Price
$91.13
Day Range
$92.58–94.89
52-Week Range
$75.85–118.90
Bid/Ask
$96.85 / $96.95
Market Cap
$60.31 Bil
Volume/Avg
42,749 / 1.7 Mil

Key Statistics

Price/Earnings (Normalized)
13.29
Price/Sales
4.10
Dividend Yield (Trailing)
2.68%
Dividend Yield (Forward)
2.68%
Total Yield
3.63%

Company Profile

NetEase, which started on an internet portal service in 1997, is a leading online services provider in China. Its key services include online/mobile games, cloud music, media, advertising, email, live streaming, online education, and e-commerce. The company develops and operates some of the China’s most popular PC client and mobile games, and it partners with global leading game developers, such as Blizzard Entertainment and Mojang (a Microsoft subsidiary).
Sector
Communication Services
Industry
Electronic Gaming & Multimedia
Stock Style Box
Large Core
Total Number of Employees
29,128
Website
https://ir.netease.com

Competitors

Valuation

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Metric
NTES
00302
00700
Price/Earnings (Normalized)
 13.2949.6519.37
Price/Book Value
 3.350.414.37
Price/Sales
 4.100.976.09
Price/Cash Flow
 12.5410.0016.44
Price/Earnings
NTES
00302
00700

Financial Strength

Metric
NTES
00302
00700
Quick Ratio
 2.811.221.17
Current Ratio
 3.011.671.35
Interest Coverage
 —−12.4316.38
Quick Ratio
NTES
00302
00700

Profitability

Metric
NTES
00302
00700
Return on Assets (Normalized)
 17.90%−3.98%12.28%
Return on Equity (Normalized)
 26.23%−4.93%23.79%
Return on Invested Capital (Normalized)
 19.53%−4.27%15.34%
Return on Assets
NTES
00302
00700

Electronic Gaming & Multimedia Industry Comparables

Screen With Investor
1-Day Chart
Name
Price
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
Nintendo Co Ltd
NTDOF
—Xtmt$64.6 Bil
 Nintendo Co Ltd ADR
NTDOY
—Tjv$64.6 Bil
 NetEase Inc Ordinary Shares
NETTF
—Pnsvm$60.4 Bil
 Electronic Arts Inc
EA
FwwdrdjmlnHkggmhj$38.2 Bil
 Roblox Corp Ordinary Shares - Class A
RBLX
HbmpdvbkxCjqgkqd$28.6 Bil
 Take-Two Interactive Software Inc
TTWO
SlxmjgfmPztzsg$26.8 Bil
 NEXON Co Ltd
NEXOF
—Bpzdq$16.6 Bil
 NEXON Co Ltd ADR
NEXOY
—Jlv$16.6 Bil
 Bilibili Inc ADR
BILI
NscbvnsztTngs$9.0 Bil

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