NetEase (NTES, Financial) reported solid results last quarter that cheered the Street and sent its stock to new highs. The numbers were driven by a combination of online games, growing mobile portfolio and expanding portal and e-commerce businesses. Especially its mobile gaming section had an outstanding performance, and the company is working hard to carry this momentum in the future. Let’s see in detail what can we expect from this company in the days ahead.
Better times ahead
Its revenue for the quarter rose 32.2% from a year ago period, while diluted EPS increased 9.3% compared to last year. Its mobile games impacted the numbers positively and the management is focused to broaden its market research in this segment. The company also increased its R&D and marketing expenses that will further back its initiatives for growth.
During the quarter, some of its games such as Fantasy Westward Journey II, battle game, Mini Westward Journey and some others had an outstanding performance. In its licensed games, the company rolled out Blizzard’s first solo adventure game, "Curse of Naxxramas," which also received a good response from users. Even as it is reaping a good return from these titles, the company launched new expansion packs for games such as New Westward Journey Online III, Ghost II, Heroes of Tang Dynasty II and Heroes of Three Kingdoms. The company will also launch its first-person shooter, Crisis 2015 in the fourth quarter.
Development to aid growth
To further add to the excitement of its users, NetEase is developing a 3-D oriental fantasy MMORPG (Massively multiplayer online role-playing games), Revelation, which received a positive feedback in its beta testing phase. This game offers players all-new warfare gaming experience, which will help to increase its user base. The management is counting on these names to continue its growth in the upcoming quarters.
In addition, its social networking platform YiChat is an ideal tool for integrating its mobile applications and services. During the quarter, the company added a number of new and exciting functions to this segment such as video chat and integrated community photo sharing, which received a good response from users. And the management continuously strives to add new features, which in fact is the key to its growth.
Conclusion
Similarly, its advertising and email services are also doing well; demonstrating steady momentum in is growth. NetEase is also experiencing rapid growth in its e-commerce business, which was driven by higher ecommerce sales. Going forward, the company will find ways to diversify and expand its offerings for the traditional online community even while it continues to introduce innovative products and services. It currently has a trailing P/E of 19.11 compared to the industry P/E of 43.51. And its forward P/E looks even more impressive at 2.57, reflecting significant improvement in its earnings. The stock is already at its all time highs and looking at its future prospects we could expect more upside to this stock.
