Throughout the past few years, NetEase (NTES, Financial) has been performing well as the stock price has surged over 180% in that time. The company’s revenue has surged at an average of over 50% in the prior several quarters.
However, in the most recent quarter, the company failed to meet revenue estimates, as it came up short by $50 million. On the other hand, the company shared earnings per share of $3.42, 53 cents more than the analyst estimates.
Despite missing estimates on revenue, the company’s overall revenue surged by 38% year over year, mainly due to the strong growth of its online game services segment. Apart from this, NetEase’s advertising services escalated 23.8% followed by 107.2% growth in its email and ecommerce as well as other segments.
Moreover, the mobile games introduced by the company became the most popular games in the industry. Recently, NetEase also launched its latest 3D mobile experience, "Onmyoji," which performed better than the company’s expectations.
Although NetEase proposes many online services, it is a frontrunner in the thriving gaming market. The company has already launched many mobile games and is on its way to build a mobile gaming portfolio of more than 100 games. The company has also partnered with giant gaming publisher, Activision Blizzard (ATVI, Financial) to allocate its games all the way through China.
On the other hand, NetEase’s latest expansion pack for "Blizzard WorldWar Legends" got amazing response from players in China easily exceeding the company’s anticipation since its September release in Mainland China. The company’s competitive position amid the growing Internet technology industry remains robust, as it develops new as well as enhanced products.
Apart from China, many of the company’s titles have also become popular in South Korea. Moreover, keeping in mind NetEase’s overall expansion tactic, it appears the company has a lot of potential to move upward in the long run.
As a matter of fact, virtual reality has become one of the hottest growth areas and is still in its infancy. The company has decided to develop content related to VR that will eventually lead NetEase forward.
Summing up
NetEase has been growing rapidly. Despite growing 180% since 2014, the company still has a lot of positive momentum. If the company successfully tackles the VR market, it will carry on setting new all-time record highs. NetEase’s stock price is down 15% from its all-time high, which looks like a great entry point for stockholders.
Disclosure: No position in the stock in this article.
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