NetEase (NTES) seeks to bolster its music business through a deal with Sony (SONY). Its streaming music-focused unit NetEase Cloud Music has secured a direct license to distribute Sony Music Entertainment (SME) songs in mainland China through its digital platforms. NetEase stock fell 42% on Monday to close at $104.90.
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NetEase is a Chinese technology company that primarily provides online services in areas such as e-commerce, digital advertising, and online games. It launched its dedicated music unit in 2013. SME is Sony’s music recording business and is among the biggest in the industry.
The deal offers NetEase an opportunity to enhance the appeal of its music service with songs from international and Chinese artists.
“With access to SME’s abundant catalogue of top artists across the globe, we’re thrilled to provide more unique and influential music content for our audience’s diverse tastes,” commented Ding Bo, Vice President of NetEase Cloud Music.
The deal gives Sony the chance to expand its music business in China, which it views as one of the most dynamic markets in the world.
In addition to digital music distribution, NetEase and Sony plan to work together to explore other opportunities. For example, they will seek to collaborate in areas such as music streaming and online karaoke services. (See NetEase stock analysis on TipRanks)
Nomura analyst Jialong Shi reiterated a Buy rating with a price target of $139 on NetEase stock. Shi’s price target suggests 32.51% upside potential to the current price.
Consensus among analysts on Wall Street is a Moderate Buy based on 6 Buy, 1 Hold, and 1 Sell ratings. The average analyst price target of $130.80 implies 24.69% upside potential to current levels.
NTES scores a 7 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock’s returns will likely align with market expectations.
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