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NetEase Inc ADR NTES

Morningstar Rating
$108.65 −0.19 (0.17%)
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Company Report

NetEase and Cloud Music: We See Resilience and Value in the Interactive Media Sector

We fine-tuned our NetEase and Cloud Music estimates but maintained our fair value estimates. Both companies are significantly undervalued and contrary to concerns over a negative macroeconomic climate, we believe their earnings possess a degree of resilience to further economic downturns. Our top pick in the interactive media space remains NetEase. We like that its videogame business should continue to benefit from this year’s launches of a slate of open-world titles and a growing number of government-issued game licenses. Meanwhile, NetEase’s separately listed subsidiary, Cloud Music, could benefit as consumers favor affordable streaming over more costly leisure activities, especially during economic downturns. The ease of access can lead to increased usage as people spend more time at home, and the habitual nature of these subscriptions means they will be the last discretionary expenses consumers choose to cut.

Price vs Fair Value

NTES is trading at a 28% discount.
Price
$108.65
Fair Value
$158.00
Uncertainty
Very High
1-Star Price
$841.80
5-Star Price
$62.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

NetEase’s expertise in asymmetric multiplayer (Identity V and Dead by Daylight) would allow it to capitalize on future opportunities in this genre.

Bears

Leadership changes at Activision Blizzard can further delay the launch of much anticipated Diablo Immortal.

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News

Trading Information

Previous Close Price
$108.84
Day Range
$107.52109.50
52-Week Range
$76.85118.90
Bid/Ask
$108.01 / $108.80
Market Cap
$70.07 Bil
Volume/Avg
715,376 / 2.4 Mil

Key Statistics

Price/Earnings (Normalized)
16.87
Price/Sales
4.86
Dividend Yield (Trailing)
1.62%
Dividend Yield (Forward)
1.62%
Total Yield
3.16%

Company Profile

NetEase, which started on an internet portal service in 1997, is a leading online services provider in China. Its key services include online/mobile games, cloud music, media, advertising, email, live streaming, online education, and e-commerce. The company develops and operates some of the China’s most popular PC client and mobile games, and it partners with global leading game developers, such as Blizzard Entertainment and Mojang (a Microsoft subsidiary).
Sector
Communication Services
Industry
Electronic Gaming & Multimedia
Stock Style Box
Large Growth
Total Number of Employees
31,119

Competitors

Valuation

Metric
NTES
TTWO
00302
Price/Earnings (Normalized)
16.8776.898.85
Price/Book Value
4.223.120.46
Price/Sales
4.864.890.84
Price/Cash Flow
15.2626.749.46
Price/Earnings
NTES
TTWO
00302

Financial Strength

Metric
NTES
TTWO
00302
Quick Ratio
2.670.621.54
Current Ratio
2.910.822.17
Interest Coverage
−19.85−3.05
Quick Ratio
NTES
TTWO
00302

Profitability

Metric
NTES
TTWO
00302
Return on Assets (Normalized)
17.40%−6.34%3.93%
Return on Equity (Normalized)
27.16%−11.18%5.00%
Return on Invested Capital (Normalized)
19.65%−7.46%4.93%
Return on Assets
NTES
TTWO
00302
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Electronic Gaming & Multimedia Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
NETTF
NetEase Inc Ordinary SharesVbfkxx$69.9 Bil
NTDOF
Nintendo Co LtdRkxv$65.2 Bil
NTDOY
Nintendo Co Ltd ADRTnyx$65.2 Bil
EA
Electronic Arts IncHsmfgc$38.1 Bil
RBLX
Roblox Corp Ordinary Shares - Class AJlzzy$26.2 Bil
TTWO
Take-Two Interactive Software IncFwxcpk$25.8 Bil
NEXOF
NEXON Co LtdChygxzp$14.1 Bil
NEXOY
NEXON Co Ltd ADRNjgvv$14.1 Bil
BILI
Bilibili Inc ADRPcnlh$4.2 Bil

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