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On Thursday, Citi analysts maintained their Buy rating and $121.00 price target for NetEase.com (NASDAQ:NTES) stock, following the company’s latest financial results. The entertainment giant, with a market capitalization of $68.45 billion, currently trades at a P/E ratio of 14.8. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value calculation. NetEase reported its fourth-quarter 2024 earnings, with total net revenues reaching Rmb26.7 billion. This figure represents a 1.4% year-over-year decrease but a 2.1% increase from the previous quarter. The results fell short of Citi’s expectations by 2% and were 1.8% below the consensus forecast of Rmb27.2 billion. Despite the quarterly decline, InvestingPro data shows the company maintains robust financial health with a 62.79% gross profit margin and steady revenue growth of 3.94% over the last twelve months.
The shortfall was primarily due to weaker-than-expected revenues in non-games segments. However, revenues from online games, which accounted for Rmb21.2 billion, grew by 1.5% year-over-year and were in line with Citi’s projections of Rmb21.0 billion. Notably, revenues from online gaming operations alone were Rmb20.5 billion, marking a 5% increase year-over-year.
Youdao (NYSE:DAO), the company’s education subsidiary, saw revenues decline by 9.5% year-over-year to Rmb1.3 billion, falling short of the expected Rmb1.6 billion. Cloud Music revenues also decreased by 5.3% year-over-year to Rmb1.9 billion, missing the forecasted Rmb2.1 billion. Revenues from other innovative businesses dropped by 17% year-over-year to Rmb2.3 billion, which was below Citi’s anticipation of Rmb2.6 billion.
Despite the revenue shortfall, NetEase’s non-GAAP net profit reached Rmb9.7 billion, or a 36.2% margin, surpassing Citi’s estimate of Rmb7.80 billion by 24.1% and the consensus of Rmb7.92 billion by 22.2%. The stronger-than-expected profit was attributed to a higher-than-anticipated gross profit from online games, lower operating expenses, and a higher foreign exchange gain. The non-GAAP earnings per ADS (EPADS) stood at Rmb15.09, exceeding both Citi’s and the consensus estimates of Rmb12.09 and Rmb12.57, respectively. For deeper insights into NetEase’s financial performance and access to 10+ additional ProTips, including detailed valuation metrics and growth indicators, explore the comprehensive Pro Research Report available on InvestingPro.
In other recent news, NetEase reported its fourth-quarter earnings, surpassing analyst expectations with adjusted earnings per share of RMB15.09, compared to the consensus estimate of RMB12.42. However, the company’s revenue for the quarter fell short of projections, reaching RMB26.75 billion against the anticipated RMB27.13 billion. For the full fiscal year 2024, NetEase’s revenue increased by 1.1% year-over-year to RMB8.0 billion, with a notable 23.1% growth in online music services revenue, attributed to a rise in paying subscribers. Despite this growth, revenue from social entertainment and other services declined from RMB3.5 billion in 2023 to RMB2.6 billion. The company’s gross profit saw a significant increase of 27.5%, reaching RMB2.7 billion, while the gross margin improved to 33.7% from 26.7% in the previous year. NetEase’s net profit more than doubled, reaching RMB1,565.4 million. The company also reported a steady increase in total monthly active users, with a DAU/MAU ratio remaining above 30%. Looking forward, NetEase aims to diversify its content offerings and enhance its music-driven community ecosystem.
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