- Benchmark analyst Fawne Jiang maintains NetEase Inc NTES with a Buy and raises the price target from $104 to $118.
- The re-rating followed the company’s upbeat 1Q23 results.
- Game growth in 1Q reflected the strong performance of Eggy Party on top of the resilience of legacy titles (FWJ and Identify V).
- With multiple games (Badlanders, Racing Master, and Justice Mobile) slated to roll out in June and the international debut of Harry Potter: Magic Awakened this summer, the analyst sees improving visibility on game growth in FY23.
- For non-game segments, NetEase has decided to focus on loss reduction and achieve a cash flow breakeven.
- As a result, the analyst sees a substantial upside in profitability and has raised his FY23 non-GAAP EPADS to $5.53 (vs. $4.62 prior).
- The outperformance of mobile games was underpinned by the strong performance of Eggy Party on top of the resilience of legacy titles.
- The company will likely launch multiple games (Badlanders, Racing Master, and Justice Mobile) in June. In addition, they are planning Harry Potter: Magic Awakened international market debut in the summer.
- With improved visibility on the games’ launch schedule and the early success of Eggy Party, the analyst raised his FY23 game growth projection.
- In addition, faster game revenue warrants higher profitability. Consequently, the analyst raised his FY23 gross profit margin for online games.
- For its non-games segments (Cloud Music and Youdou), NTES has focused on high-quality growth by purging low-profit products and services, including reducing revenue sharing on social entertainment.
- Citigroup analyst Alicia Yap maintains NetEase with a Buy and raises the price target from $115 to $118.
- UBS analyst Felix Liu maintains NetEase with a Buy, raising the price target from $112 to $113.
- Price Action: NTES shares traded higher by 5.56% at $90.50 on the last check Friday.
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