NetEase (NTES, Financial) reported inspiring results for the second quarter of 2014. It experienced improvements in all of its three big segments such as online and mobile games, advertising services and e-commerce business support. Its online games picked up the pace in both its self-developed and licensed games on the back of exceptional performance by its Mini Westward Journey, its first mobile card battle game. Also, its flagship game Fantasy Westward Journey II and its mobile version gained tremendous admiration that drove its performance for the quarter.
Looking to sustain the growth
Looking ahead, NetEase continues to advance its growth as it looks forward to explore the out of the country licensing. Also, it remains on track to embrace expansion opportunities with the overseas players that should augments growth for its traditional online and mobile games as well as other services. NetEase is extending its relationship with Blizzard Entertainment in order to bring its free-to play games to its users in China.
These free-to-play games include its online team brawler Heroes of Strom and their award-winning action role-playing game Diablo III. NetEase has recently launched iPad version of one of their popular game Hearthstone: Heroes of Warcraft. Also, the company has started rolling out Curse of Naxxramas, it first single player adventure for Heroes of Warcraft.
In addition, NetEase continues to benefit from its growing online games product portfolio. It has, as per its growth strategy, introduced a fresh expansion pack for its growing existing content. This expansion pack also includes content for new releases and original online games. The company has additionally launched new expansion packs for its self-developed games such as Ghost II, Legend of Fairy and Kung Fu Master. These expansion packs will certainly enhance its performance in the second-half of the year.
Moreover, the company is planning to launch its first-person shooter game Revelation and Crisis 2015 in the second-half. NetEase has done away with the second-round of testing for the game. Also, it is focused on releasing expansion packs and updates for various popular games like Fantasy Westward Journey II, New Westward Journey Online II, New Westward Journey Online III, Tianxia III, Heroes of Tang Dynasty II and Heroes of Three Kingdoms in the remaining quarters of the year.
New games
NetEase has also rolled over new games during the second-quarter for its mobile offerings. It has recently released two new licensed mobile games Ninja Must Die 2 and the other includes KONAMI World Soccer Collections. Also, it launched a self-developed farm business mobile game NetEase Farm. Further, the company is planning to introduce many new exciting titles so as to diversify its mobile offerings product portfolio. These games will certainly enhance performance for its mobile platform and drive its growth in the long run.
Furthermore, NetEase is productively engaged in integrating its mobile offerings with that of local social messaging platform YiChat. It is executing various growth initiatives. Its growth strategy such as Fresh Social Life integrates distinguished and ground-breaking social networking functions with YiChat. These new innovative functions such as Crowd Ask, a community-driven Q&A platform and Rideshare, a social carpooling service are quite appealing and bring new users to its mobile games platform. Also, it is accelerating engagement for the existing users. Further, the company remains on track to bring many new exciting additional functions with YiChat such as online payment system that should drive its growth in the future.
Conclusion
NetEase is performing quite well. Its revenue continues to grow at a strong double-digit rate,while its bottom line is growing at a high single-digit rate that promises great returns for its investors and shareholders. Moreover, the company is effectively executing new and fresh content and extending its relationship with overseas players to bring in many new exciting games to its audience in China. The analysts have estimated CAGR of 14.42% for the next five years that indicate remarkable growth prospects for the company in the long-run. It is also expected to grow at CAGR of 9.30% this year and 13.80% next year, respectively, that offers significant returns to investors.
