Friday - Benchmark has raised the price target for NetEase.com (NASDAQ:NTES) to $145 from $144 while maintaining a Buy rating on the shares. The revision follows NetEase's first-quarter 2024 results, which showcased both revenue and profitability that surpassed expectations.
NetEase's financial performance in the first quarter of 2024 has led to a positive outlook for the company's growth in the current fiscal year. The company's existing games have shown healthy performance, and a robust lineup of new game launches is expected to begin in the summer. Upcoming titles include "Naraka: Bladepoint" mobile, "Where Winds Meet" for PC followed by a mobile version, and "Once Human."
The company's renewed partnership with Blizzard is anticipated to boost PC game growth in the second half of 2024. This collaboration is part of a broader strategic transformation that NetEase is undergoing, which includes venturing into new game genres beyond its traditional massively multiplayer online (MMO) offerings.
The strategic shift aims to open up opportunities for NetEase's overseas expansion and entry into high Daily Active User (DAU) games. Benchmark's analyst believes that NetEase is well-positioned to capitalize on an expanded total addressable market (TAM) for users. The raised price target to $145 reflects the firm's confidence in NetEase's projected game growth.
InvestingPro Insights
Following Benchmark's positive assessment of NetEase (NASDAQ:NTES) and their raised price target, InvestingPro data provides additional context to the company's financial health and market performance. With a P/E ratio of 15.27 and an adjusted P/E ratio for the last twelve months as of Q4 2023 of 15.03, NetEase trades at a valuation that appears reasonable relative to near-term earnings growth. The company's robust gross profit margin of 60.95% and operating income margin of 26.78% in the same period highlight its efficiency and profitability.
NetEase's strong fundamentals are complemented by a track record of dividend payments for 12 consecutive years, with a dividend yield of 2.7% as of the latest data. This consistency is a testament to the company's financial stability and commitment to returning value to shareholders. Moreover, the InvestingPro Tips note that NetEase holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations, providing financial flexibility and reducing risk for investors.
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