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NetEase (NTES)
NASDAQ:NTES
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NetEase
(NASDAQ:NTES)
79Outperform
Positive Factors
Earnings
Non-GAAP operating profit was Rmb8.8bn (+14%YoY and 7% above MSe as the Rmb1.1bn saving in sales & marketing expense more than offset the revenue miss).
Market Strategy
The game business remains resilient with a focus on global expansion.
Product Launch
Netease announced it will relaunch Condor Heroes 2.0 to revitalize this big title after suspending the 1.0 version.
Negative Factors
Mobile Games Revenue
Mobile game was -6%QoQ/-11%YoY to Rmb13.4bn, 15% below MSe.
Non-Game Business
Revenue was below expectations due to weaker non-game business.
Revenue Expectations
Revenue fell short of consensus expectations mainly due to weaker performance in mobile games.
NetEase (NTES) vs. S&P 500 (SPY)
Market Cap
$68.06B
Dividend Yield2.36%
Average Volume (3M)1.65M
Price to Earnings (P/E)17.1
Beta (1Y)0.44
Revenue Growth0.23%
EPS Growth-0.09%
CountryUS
Employees26,028
SectorCommunication Services
Sector Strength83
IndustryElectronic Gaming & Multimedia
Share Statistics
EPS (TTM)2.08
Shares Outstanding644,493,800
10 Day Avg. Volume1,568,947
30 Day Avg. Volume1,651,631
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$117.44Price Target Upside6.96% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering8
NetEase Business Overview & Revenue Model
Company DescriptionNetEase, 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 MoneyNetEase 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 Key Performance Indicators (KPIs)
Any
Gross Margin by Segment
Reveals the percentage of revenue that exceeds the cost of goods sold for each segment, offering insights into pricing power and cost management efficiency.
Reveals the percentage of revenue that exceeds the cost of goods sold for each segment, offering insights into pricing power and cost management efficiency.
Data provided by:
Main Street Data
Main Street DataNetEase Financial Statement Overview
Summary
NetEase demonstrates strong financial health with consistent revenue and net income growth, robust gross profit margins, and a strong balance sheet. However, fluctuations in total debt pose moderate risks to financial stability.Income Statement
NetEase exhibits strong profitability with a consistent increase in revenue and net income over the years. The gross profit margin is robust, and both EBIT and EBITDA margins show improvement, indicating effective cost management and operational efficiency. Revenue growth rate is positive, showing a healthy upward trend. Overall, the company demonstrates stability and growth in its income statement.―
Balance Sheet
The balance sheet of NetEase reflects a strong equity position with a favorable equity ratio and a manageable debt-to-equity ratio, suggesting a conservative leverage strategy. The return on equity is impressive, indicating effective utilization of shareholder funds to generate profits. However, the total debt has shown fluctuations, which might pose moderate risks in financial stability.78
Cash Flow
NetEase's cash flow statement is robust with consistently strong operating cash flow and free cash flow growth. The operating cash flow to net income ratio is healthy, indicating efficient cash generation relative to net income. Free cash flow to net income ratio is also favorable, demonstrating the company's ability to generate cash after capital expenditures, supporting further investments and dividend payments.―
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 105.30B | 103.47B | 96.50B | 87.61B | 73.67B | Gross Profit |
| 65.81B | 63.06B | 52.77B | 46.97B | 38.98B | EBIT |
| 29.58B | 27.71B | 19.63B | 16.42B | 14.54B | EBITDA |
| 32.00B | 30.76B | 22.49B | 19.69B | 18.00B | Net Income Common Stockholders |
| 29.70B | 29.42B | 20.34B | 16.86B | 12.06B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 137.58B | 126.72B | 117.46B | 97.53B | 93.47B | Total Assets |
| 195.99B | 185.92B | 172.76B | 153.64B | 141.87B | Total Debt |
| 12.23B | 20.48B | 27.53B | 20.63B | 19.50B | Net Debt |
| -39.15B | -945.42M | 2.64B | 6.13B | 10.39B | Total Liabilities |
| 53.50B | 57.84B | 63.89B | 54.37B | 58.88B | Stockholders Equity |
| 138.69B | 124.29B | 104.73B | 95.33B | 82.13B |
| Cash Flow | Free Cash Flow | |||
| 38.40B | 31.06B | 25.07B | 21.82B | 21.60B | Operating Cash Flow |
| 39.68B | 35.33B | 27.71B | 24.93B | 24.89B | Investing Cash Flow |
| 17.92B | -17.04B | -7.37B | -7.08B | -29.19B | Financing Cash Flow |
| -27.34B | -21.47B | -10.24B | -12.59B | 9.91B |
NetEase Technical Analysis
Positive
109.80
Price Trends
101.27
Positive
99.03
Positive
91.62
Positive
Market Momentum
2.30
Negative
67.60
Neutral
91.64
Negative
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 109.8 is above the 20-day moving average (MA) of 101.30, above the 50-day MA of 101.27, and above the 200-day MA of 91.62, indicating a bullish trend. The MACD of 2.30 indicates Negative momentum. The RSI at 67.60 is Neutral, neither overbought nor oversold. The STOCH value of 91.64 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for NTES.
NetEase Risk Analysis
NetEase disclosed 94 risk factors in its most recent earnings report. NetEase reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
NetEase Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $68.06B | 17.08 | 22.60% | 2.36% | 0.23% | -0.09% | |
74 Outperform | $39.38B | 38.45 | 14.04% | 0.50% | -2.99% | -0.46% | |
73 Outperform | $50.25B | ― | -460.30% | ― | 30.24% | 27.61% | |
68 Neutral | $2.04B | 12.48 | -220.61% | 7.35% | -0.69% | -31.96% | |
63 Neutral | $7.46B | ― | -9.43% | ― | 17.42% | 72.64% | |
60 Neutral | $38.74B | ― | -51.45% | ― | 1.00% | -148.89% | |
59 Neutral | $13.76B | 7.65 | -2.42% | 3.86% | 2.19% | -37.76% |
* Communication Services Sector Average
Performance Comparison
NTES
NetEase
109.80
10.72
10.82%
EA
Electronic Arts
154.74
24.87
19.15%
TTWO
Take-Two
225.32
76.98
51.89%
BILI
Bilibili
18.28
3.51
23.76%
PLTK
Playtika Holding
5.37
-1.99
-27.04%
RBLX
Roblox
71.82
31.71
79.06%
NetEase Earnings Call Summary
Earnings Call Date:Feb 20, 2025
(Q4-2024)
| % Change Since: 6.66%|
Next Earnings Date:May 15, 2025
Earnings Call Sentiment Positive
NetEase demonstrated strong revenue growth and successful game launches, particularly with Marvel Rivals and the return of Blizzard games in China. Youdao achieved its first annual operating profit, indicating positive financial developments. However, there were declines in revenue for Youdao learning services, NetEase Cloud Music, and innovative businesses. Lower gross profit margins for games also present a challenge. Overall, the highlights and achievements outweigh the challenges, reflecting a generally positive sentiment.Q4-2024 Updates
Positive Updates
Record Revenue Achieved
NetEase achieved a total net revenue of RMB 105.3 billion in 2024, with RMB 83.6 billion from games and related services, marking the 22nd consecutive year of revenue growth from online games operations.
Marvel Rivals Success
The launch of Marvel Rivals was a major success, reaching the number one spot on Steam's top seller chart within four hours and accumulating over 40 million players.
Where Winds Meet Launch
Where Winds Meet reached 50 million players within two weeks of its launch, topping iOS download charts and driving engagement with its innovative gameplay.
Blizzard Game Returns
The return of Blizzard games to China was highly successful, with World of Warcraft and Hearthstone generating strong momentum.
Strong Performance of PC Client Games
PC client games achieved 17% year-over-year growth, with a 57% increase in Q4, driven by titles like Naraka: Bladepoint and Westward Journey Online II.
Youdao's First Annual Operating Profit
Youdao achieved its first-ever annual operating profit in 2024, with a 10% year-over-year increase in operating profit in Q4.
Negative Updates
Decline in Youdao Learning Services Revenue
Learning services revenue for Youdao declined by 9.5% year-over-year in the fourth quarter as the company focused on balancing revenue and profitability.
Decrease in NetEase Cloud Music Revenue
NetEase Cloud Music's net revenue decreased by 5% year-over-year in the fourth quarter, reflecting lower revenue from social entertainment services.
Decline in Innovative Business Revenue
Revenue from innovative businesses and others decreased by 17% year-over-year in the fourth quarter.
Lower Gross Profit Margins in Games
Gross profit margin for games decreased to 66.7% in the fourth quarter, down from 69.5% in the same period last year, due to a higher proportion of revenue from licensed games.
Company Guidance
During the NetEase 2024 Fourth Quarter and Fiscal Year 2024 Earnings Conference Call, the company provided detailed guidance on its financial and operational performance. Total net revenue for 2024 reached RMB 105.3 billion, with games and related value-added services contributing RMB 83.6 billion, both marking record highs. The company emphasized its commitment to innovation and global market expansion, highlighting the success of its game titles like Marvel Rivals, which amassed over 40 million players and topped Steam's charts. NetEase's PC client games achieved a 17% year-over-year growth, and mobile games accounted for about 73% of the total net revenue from online games for the full year. The company also reported a 31% year-over-year increase in non-GAAP net income attributable to shareholders for the fourth quarter, totaling RMB 9.7 billion. Additionally, it announced a dividend of US$1.22 per ADS and repurchased approximately RMB 21.2 million ADS. The call underscored the company's strategic focus on high-quality content, operational excellence, and sustainable long-term growth.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.