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Shares of NetEase Dropped 11% on Profit Decline

Of the 30 analysts covering NetEase, 20 issued "buy" or higher ratings and 10 announced "hold" ratings, according to Thomson Reuters Eikon.

CapitalWatch Staff
    Aug 09, 2018 7:10 PM  PT
Shares of NetEase Dropped 11% on Profit Decline

The stock of NetEase Inc. (Nasdaq: NTES) dropped nearly 11 percent Thursday after the company announced disappointing second quarter earnings.

The internet and online game services provider said its net income shrinked roughly 30 percent to $318.3 million, or $2.44 per American depositary share, compared with income of $454.5 million a year ago. 

Revenue during the second quarter rose more than 22 percent to $2.5 billion from $2.05 billion in the year-ago quarter, driven by higher-than-expected deferred revenue recognition, improved mobile game GPM, tax credit, and FX gain. 

After the announcement, Benchmark cut its price target for NetEase to $320 per share from $340. However, Benchmark remained bullish on the long run. "Game diversification strategy and overseas expansion should help company expand user reach and capture new monetization opportunities," Benchmark said in its report.  

Of the 30 analysts covering NetEase, 20 issued "buy" or higher ratings and 10 announced "hold" ratings, according to Thomson Reuters Eikon.

"Our PC-client and mobile games continue to serve as dual growth engines," said William Ding, the chief executive officer of NetEase. 

"At the end of June, we launched the highly anticipated PC-client game Justice. Featuring exciting new state-of-the-art technology and graphics, Justice has become one of the most acclaimed PC games launched in China in recent years," he added.

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The stock of NetEase dropped significantly over the past six months. 

(Source: Thomson Reuters Eikon)

Since December, NetEase's shares have lost more than a third of their value. It closed at $225.22 per share in New York Thursday, down $27.75. 

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