NetEase (NTES, Financial) posted solid results in the recently reported quarter. The company impressed investors with solid growth of 32% in revenue. NetEase is optimistic about its growth as all of its three segments are doing well. In brief, NetEase is expecting strong growth in its email, ecommerce and other businesses. Let us take a closer look at the overall business of NetEase.
Why NetEase's prospects are strong
It is developing many games under its label and is expecting good adoption across the mobile segment. To further address this, NetEase is increasing its focus on mobile games and is also stretching its market presence. To facilitate this, the company is ramping up its R&D while investing meaningfully in this initiative. More from the gaming, NetEase saw good adoption of its games such as Fantasy Westward Journey II across its PC and mobile platforms. Seeing the success of these games, NetEase is up for the release of expansion packs for these games in July.
NetEase is seeing good growth opportunities in the Chinese gaming market. To catch this opportunity, NetEase is closely working with Blizzard Entertainment to bring exciting new games on this platform. The main attraction about it games is that they are good recreation material and they also impress gamers with new and exciting features. NetEase is excited about its upcoming shooter game called Crisis 2015. The game had been through Beta testing and NetEase is pleased to get positive feedback so far. It is now focusing on giving a final touch to the game before its final launch. This all-new warfare experience is expected to drive more gamers to the company, helping it to improve its sales.
Diversification moves
In China, NetEase’s social networking platform YiChat is moving well and can be an ideal vehicle for integrating its mobile applications and services. The company is now planning to introduce a number of new and exciting features to make it more attractive. In fact the existing features such as video chat and integrated community photo sharing are well received by the users, and the company is pleased about it.
NetEase is further happy with the outstanding performance across its email and ecommerce businesses. In upcoming quarters, the company is expecting rapid growth across the ecommerce channel that will drive its sales. Besides these strategies, NetEase is looking for ways to diversify and expand its offerings. It is dedicated to its strategy of introducing innovative products and services from time to time. In addition, it is also investing well in marketing and research as well.
Conclusion
With a trailing P/E of 19.51, the stock looks reasonable, but the forward P/E of just 2.63 shows slow earnings growth in the near term. But the company seems to be a solid pick now as it has definitely got steam with a profit margin of 44.25%. Considering these points I would like to suggest that investors include NetEase in their portfolio.
