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On Friday, Bernstein's SocGen Group adjusted its outlook on NetEase (NASDAQ:NTES) Inc. (9999:HK) (NASDAQ: NTES), reducing the price target from HK$205.00 to HK$165.00. Despite this change, the firm maintained an Outperform rating for the company's stock.
NetEase, a prominent player in the gaming industry, reported second-quarter earnings that did not meet the Bloomberg consensus estimates. The company's group revenue saw a year-on-year increase of 6.1%, reaching RMB25.5 billion, which was slightly below the consensus projection of RMB26.1 billion.
The gross profit for the quarter stood at RMB16.0 billion, falling short of the consensus estimate of RMB16.2 billion by 1.2%. This figure also missed Bernstein's own expectations by a more significant margin. Non-GAAP net income was reported at RMB7.8 billion, just under the RMB8.0 billion that was anticipated.
The Gaming & Value-Added Services (VAS) segment of NetEase's business brought in RMB20.1 billion in revenue, marking a 6.7% increase from the previous year. The non-GAAP core gaming operating profit experienced an 11% growth, reaching RMB8.8 billion.
Additionally, NetEase's share buyback activity for the quarter was notable, with the company repurchasing US$290 million worth of stock. This amount represents the highest quarterly buyback by the company since the fourth quarter of 2022.
In other recent news, NetEase Inc. reported a robust Q2 growth in their recent earnings call. The company's total revenue reached RMB25.5 billion ($3.5 billion), a 6% increase from the previous year, with successful games such as Once Human and Naraka: Bladepoint Mobile playing a significant role in this surge. AI integration in game development also contributed to a 200% YoY growth in AI-driven subscription services.
NetEase announced dividends of $0.087 per share and a share repurchase program involving 12 million ADSs. The company's gross profit margin also increased to 62.9% in Q2 from 59.9% in the previous year.
In terms of future prospects, NetEase plans to continue focusing on innovation and expansion across different genres and platforms, with optimism surrounding the upcoming launches of Where Winds Meet and Marvel Rivals. The company's collaboration with Blizzard, particularly the successful return of World of Warcraft, is expected to yield further cooperation and positive outcomes.
InvestingPro Insights
As NetEase navigates through its financial performance, real-time data from InvestingPro provides a deeper understanding of the company's market position. With a market capitalization of $53.01 billion and a P/E ratio that stands at 12.6, NetEase appears to be trading at a low earnings multiple compared to its near-term earnings growth, which could signal a potential undervaluation to investors. Additionally, the company's PEG ratio of 0.35 suggests that its stock price is modest relative to its earnings growth trajectory.
InvestingPro Tips highlight that NetEase has maintained its dividend payments for 12 consecutive years and has raised its dividend for 3 consecutive years, with a notable dividend yield of 3.14%. This consistent return to shareholders is particularly noteworthy in light of the company's recent stock performance, which has seen a decline of over 8% in the past week. Despite the recent downturn, NetEase's strong cash position—holding more cash than debt on its balance sheet—and its ability to cover interest payments comfortably are positives that investors may consider.
For those seeking to delve deeper into the financial health and future prospects of NetEase, additional insights are available on InvestingPro, which features over 10 more InvestingPro Tips for the company. These insights can be accessed by visiting https://www.investing.com/pro/NTES, offering a comprehensive analysis to inform investment decisions.
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