NetEase (NTES) shares fell sharply on June 20, after the Chinese videogame developer postponed the release of its highly anticipated Diablo Immortal title. NetEase’s stock is dual-listed in Hong Kong and the U.S.
Diablo Immortal is a mobile and PC game that NetEase developed in partnership with Activision Blizzard (ATVI). Microsoft (MSFT) agreed to acquire Activision Blizzard for $68.7 billion, explaining that the deal would also provide it with metaverse building blocks.
NetEase Delays Diablo Immortal’s Launch for Improvements
NetEase had planned to release the game in mainland China on June 23. According to a CNBC report, NTES postponed the title’s release without specifying a future date. According to NetEase, the developer team needed to make some adjustments to support a broader range of device types. Additionally, the team is working on optimizing the game’s performance.
On June 2, Diablo Immortal made its international debut. The game is expected to launch in other Asian markets such as Malaysia, Indonesia, Hong Kong, and Taiwan on July 8, according to a Bloomberg report.
Chinese Regulatory Challenges
China is NetEase’s main market. It seems investors are worried that the delayed release of a major title like Diablo Immortal would hurt NetEase’s sales in its most important market.
Investors may also be concerned about NetEase potentially running into regulatory challenges that could complicate its sales recovery. Chinese authorities have only recently resumed approval of games after a long pause amid a crackdown on technology companies.
However, regulatory headwinds continue to hit NetEase.
According to a Bloomberg report, the decision to postpone the Chinese launch of Diablo Immortal came on the heels of NetEase’s Weibo social media account being recently banned from posting because of an unspecified violation of regulatory laws.
Wall Street’s Take
Consensus among analysts is a Strong Buy based on fives Buys and one Hold. The average NetEase price target stands at $128, which implies upside potential of 37.4% from current levels.
Smart Score Rating
NetEase scores a ‘Perfect 10’ from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Key Takeaway for Investors
If NetEase’s Diablo Immortal clears the hurdles that have delayed its release in China, a huge market awaits it. China’s mobile and PC revenue is projected to grow to $55.23 billion by 2026, from $45.49 billion in 2021.
