NetEase (NTES) AI Stock Analysis

• Market Cap: $81.45B
• Dividend Yield: 2.1%
• Average Volume (3M): 1.13M
• Price to Earnings (P/E): 18.6
• Beta (1Y): 0.59
• Revenue Growth: 1.26%
• EPS Growth: 6.84%
• Country: US
• Employees: 26,028
• Sector: Communication Services
• Sector Strength: 89
• Industry: Electronic Gaming & Multimedia
• EPS (TTM): 2.43
• Shares Outstanding: 644,493,800
• 10 Day Avg. Volume: 907,204
• 30 Day Avg. Volume: 1,131,010
• PEG Ratio: 0.85
• Price to Book (P/B): 22.37
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 99.01
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $133.44
• Price Target Upside: 3.71% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 8

• Rating: 85 Outperform
• Price Target: $152.00 ▲(18.13%Upside)

NetEase's robust financial performance and positive technical indicators are the primary drivers of its high stock score. The company's strategic focus on innovation in gaming, alongside strong earnings and global expansion, further bolster its outlook. Valuation is reasonable, and while there are challenges in some segments, the overall sentiment remains positive.

Positive Factors

Financial Performance

Operating profit increased by 37% YoY, mainly due to disciplined operational expense control.

Product Launch

Marvel Rivals will launch a new hero, Ultron, which is expected to become a new grossings driver due to the character's popularity in the Marvel series.

Revenue Growth

Games business regains momentum with reaccelerating and better-than-expected revenue growth.

Negative Factors

Mobile Games Performance

Mobile game was -6%QoQ/-11%YoY to Rmb13.4bn, 15% below MSe.

Revenue Decline

NetEase's Cloud music revenue declined by 8% YoY, mainly due to the decline in social entertainment revenue.

Revenue Shortfall

Revenue fell short of consensus expectations mainly due to weaker performance in mobile games.

NetEase Business Overview & Revenue Model

Company Description

NetEase, Inc. engages in online games, music streaming, online intelligent learning services, and internet content services businesses in China and internationally. The company operates through Games and Related Value-Added Services; Youdao; Cloud Music; and Innovative Businesses and Others segments. It develops and operates PC and mobile games, as well as offers games licensed from other game developers. The company's products and services include Youdao Dictionary, an online knowledge tool; Youdao Translation, a tool specifically designed to support translation needs of business and leisure travelers; U-Dictionary, an online dictionary and translation app; Youdao Kids' Dictionary, a smart and fun tool; smart devices, such as Youdao Dictionary Pen, Youdao Smart Learning Pad, and Youdao Listening Pod; online courses; interactive learning apps; and education digitalization solutions, such as Youdao Smart Learning Terminal, a device that automates paper-based homework processing; Youdao Smart Cloud, a cloud-based platform that allows third-party app developers, smart device brands, and manufacturers to the company's OCR capabilities; and Youdao Sports, a sports-centric educational system. Its products and services include NetEase Cloud Music, a music streaming platform; Yanxuan, an e-commerce platform, which sells private label products; www.163.com portal and related mobile app, Wangyi Xinwen, which deliver information such as news, sports events, technology, fashion trends, and online entertainment; NetEase Mail, an email service; NetEase CC Live streaming, a live streaming platform with a focus on game broadcasting; and NetEase Pay, a payment platform. The company was formerly known as NetEase.com, Inc. and changed its name to NetEase, Inc. in March 2012. NetEase, Inc. was founded in 1997 and is headquartered in Hangzhou, the People's Republic of China.

How the Company Makes Money

NetEase primarily generates revenue through its online gaming sector, which accounts for the majority of its earnings. The company develops, operates, and licenses a wide array of games, including MMORPGs, mobile games, and casual games, catering to diverse consumer preferences. In addition to self-developed titles, NetEase also collaborates with global gaming leaders like Blizzard Entertainment to distribute and operate popular franchises in China. Another significant revenue stream comes from its e-commerce platforms, such as NetEase Yanxuan, which leverages a direct-to-consumer model to sell a variety of lifestyle products. Advertising services and other value-added services, such as premium email and music streaming subscriptions, also contribute to NetEase's revenue. The company's diverse business model and strategic partnerships are key factors in its financial performance.

NetEase Financial Statement Overview

Summary

NetEase demonstrates excellent financial health with strong profitability, efficient operations, and robust cash flow management. Its low leverage profile and consistent growth across key financial metrics underscore its financial strength.

Income Statement

NetEase shows strong growth and profitability in its TTM period, with a Gross Profit Margin of 62.7% and a Net Profit Margin of 30.2%. Revenue growth is stable, with a healthy increase of 1.9% from the previous year. The EBIT Margin is robust at 30.2%, and the EBITDA Margin is strong at 32.4%, indicating efficient operations and cost management.

Balance Sheet

The company maintains a strong financial position with a low Debt-to-Equity Ratio of 0.07, indicating minimal reliance on debt financing. The Return on Equity stands at an impressive 22.5%, showcasing effective use of equity capital. The Equity Ratio is solid at 71.6%, reflecting a strong asset position relative to liabilities.

Cash Flow

NetEase exhibits a strong cash flow position with a Free Cash Flow Growth Rate of 6.7% for the TTM period. The Operating Cash Flow to Net Income Ratio is 1.3, demonstrating effective conversion of net income to cash. The Free Cash Flow to Net Income Ratio is also high at 1.2, indicating strong cash generation relative to net income.

Breakdown
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
107.27B	105.30B	103.47B	96.50B	87.61B	73.67B
	Gross Profit
67.27B	65.81B	63.06B	52.77B	46.97B	38.98B
	EBIT
32.40B	29.58B	27.71B	19.63B	16.42B	14.54B
	EBITDA
34.73B	32.00B	30.76B	22.49B	19.69B	18.00B
	Net Income Common Stockholders
32.36B	29.70B	29.42B	20.34B	16.86B	12.06B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
140.11B	137.58B	126.72B	117.46B	97.53B	93.47B
	Total Assets
200.86B	195.99B	185.92B	172.76B	153.64B	141.87B
	Total Debt
9.82B	12.82B	20.48B	27.53B	20.63B	19.50B
	Net Debt
-31.92B	-38.57B	-945.42M	2.64B	6.13B	10.39B
	Total Liabilities
52.99B	53.50B	57.84B	63.89B	54.37B	58.88B
	Stockholders Equity
143.83B	138.69B	124.29B	104.73B	95.33B	82.13B
Cash Flow		Free Cash Flow
39.99B	37.47B	31.06B	25.07B	21.82B	21.60B
	Operating Cash Flow
42.23B	39.68B	35.33B	27.71B	24.93B	24.89B
	Investing Cash Flow
-7.78B	17.92B	-17.04B	-7.37B	-7.08B	-29.19B
	Financing Cash Flow
-35.13B	-27.34B	-21.47B	-10.24B	-12.59B	9.91B

NetEase Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 128.67
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTES, the sentiment is Positive. The current price of 128.67 is above the 20-day moving average (MA) of 126.38, above the 50-day MA of 113.45, and above the 200-day MA of 96.43, indicating a bullish trend. The MACD of 4.84 indicates Positive momentum. The RSI at 61.39 is Neutral, neither overbought nor oversold. The STOCH value of 54.29 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for NTES.

NetEase Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NTES	85 Outperform	$81.45B	18.61	23.93%	2.10%	1.26%	6.84%
RBLX	72 Outperform	$69.63B	―	-460.30%	―	30.24%	27.61%
BILI	71 Outperform	$8.34B	―	-4.29%	―	21.11%	87.93%
EA	70 Outperform	$37.87B	35.56	16.13%	0.50%	-0.81%	-9.28%
PLTK	63 Neutral	$1.71B	12.17	-220.61%	8.76%	1.64%	-32.31%
Sector *	61 Neutral	$14.57B	5.94	-3.83%	7.78%	2.79%	-33.24%
TTWO	57 Neutral	$42.14B	―	-114.76%	―	5.31%	-15.57%