NetEase Inc Receives a Hold from Jefferies

By Austin Angelo

Jefferies analyst Karen Chan reiterated a Hold rating on NetEase Inc (NASDAQ: NTES) yesterday and set a price target of $245. The company’s shares closed yesterday at $251.86, close to its 52-week high of $272.58.

Chan wrote:

“Netease reported 3Q16 results with revenue below Street/our estimate by 4.6%/10.4%. Online games/ advertising/e-Commerce revenue came in 7%/5%/20% below our estimates respectively. Non-GAAP net profit beat Street by 4.6% and in line with our estimate. Hold; PT USD245. Revenue missed Street/JEF est. by 4.6%/10.4%: Total revenue came in at RMB9.2bn, +2.9% QoQ, +38.1% YoY, 4.6% below consensus and 10.4% below our estimate. Online game revenue was up 26% YoY and 2% QoQ to RMB6.6bn, accounting for 71.3% of total revenue, -6.8pcpt YoY, -0.6pcpt QoQ, 7.4% below our estimate. Mobile game revenue came in 13% below our estimate at RMB3.9bn, +35.5% YoY but -4.5% QoQ, representing 57% of total online games, down from 60.9% in 2Q16 and up from 53% in 3Q15. Advertising revenue was up 23.8% YoY and 6.1% QoQ to RMB563mn, accounting for 6.1% of total revenue. Email, e-Commerce and other revenue was RMB2.1bn, +107.2% YoY, +4.9% QoQ, representing 22.6% of total revenue, up from 22.2% in 2Q16 and 15% in 3Q15. Deferred revenue reached RMB5.5bn as of Sept 2016, vs. RMB4.9bn as of June 2016, 1.6% above our estimate.”

According to, Chan is a 3-star analyst with an average return of 2.1% and a 52.2% success rate. Chan covers the Technology sector, focusing on stocks such as Alibaba Group, Facebook Inc, and Alphabet Inc.

NetEase Inc has an analyst consensus of Strong Buy, with a price target consensus of $274.25.

Based on NetEase Inc’s latest earnings report for the quarter ending June 30, the company posted quarterly revenue of $1.36 billion and quarterly net profit of $414 million. In comparison, last year the company earned revenue of $1.06 billion and had a net profit of $298 million.

NetEase, Inc. engages in the provision of online internet technology services. its business activities include online game services, advertising services, e-mail services, e-commerce and other services. The online game services segment offers multi-player online role-playing games and mobile games. The advertising services segment involves banner advertising, channel sponsorships, direct e-mail, interactive media-rich sites, sponsored special events, games, contests and other activities. The e-mail services comprises free and fee-based premium e-mail services. The e-commerce services compromise online selling and payment platform, e-reading applications, matchmaking services, online music, social network, personalized photo-based products, and online game-related accessories. The company was founded by Lei Ding in June 1997 and is headquartered in Beijing, China.