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NetEase (NTES)
NASDAQ:NTES
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NetEase
(NASDAQ:NTES)79Outperform
Positive Factors
Earnings
Non-GAAP operating profit was Rmb8.8bn (+14%YoY and 7% above MSe as the Rmb1.1bn saving in sales & marketing expense more than offset the revenue miss).
Product Relaunch
More than 1.4 million gamers have made appointments to join the relaunch of Condor Heroes.
Negative Factors
Mobile Games Performance
Mobile games revenue declined by 11% YoY, mainly due to the lack of new mobile games and the high base effect.
NetEase (NTES) vs. S&P 500 (SPY)
Market Cap
$63.50B
Dividend Yield2.36%
Average Volume (3M)1.37M
Price to Earnings (P/E)16.2
Beta (1Y)0.55
Revenue Growth0.23%
EPS Growth-0.09%
CountryUS
Employees29,128
SectorCommunication Services
Sector Strength85
IndustryInteractive Multi-Media
Share Statistics
EPS (TTM)6.41
Shares Outstanding644,493,800
10 Day Avg. Volume1,635,701
30 Day Avg. Volume1,366,683
Financial Highlights & Ratios
PEG Ratio20.71
Price to Book (P/B)N/A
Price to Sales (P/S)4.68
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$117.72Price Target Upside14.54% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering9
NetEase Business Overview & Revenue Model
Company DescriptionNetEase, Inc. (NTES) is a leading Chinese technology company operating primarily in the internet and online services sectors. Founded in 1997, the company is headquartered in Hangzhou, China, and is recognized for its innovative contributions to internet content, community, communications, and commerce. NetEase develops and operates some of China's most popular online PC and mobile games, and is also a significant player in the e-commerce space through its subsidiaries. Additionally, the company provides advertising services, email services, and other internet-related services, catering to a diverse range of digital consumers.
How the Company Makes MoneyNetEase makes money through several key revenue streams. The primary source of revenue is its online gaming services, where it develops and publishes a range of popular PC and mobile games. This segment benefits from a combination of in-game purchases, subscription fees, and licensing arrangements. The company also capitalizes on its strong advertising services, leveraging its large user base across various platforms. Another significant revenue stream is NetEase's e-commerce operations, which include platforms like NetEase Yanxuan, specializing in direct-to-consumer retail. Additionally, the company generates income through its music streaming service, NetEase Cloud Music, and other internet services. Strategic partnerships and collaborations, such as with Blizzard Entertainment for game licensing, further enhance its revenue potential.
NetEase Financial Statement Overview
Summary
NetEase demonstrates strong financial health with consistent revenue and net income growth, robust gross profit margins, and a strong balance sheet. However, fluctuations in total debt pose moderate risks to financial stability.Income Statement
NetEase exhibits strong profitability with a consistent increase in revenue and net income over the years. The gross profit margin is robust, and both EBIT and EBITDA margins show improvement, indicating effective cost management and operational efficiency. Revenue growth rate is positive, showing a healthy upward trend. Overall, the company demonstrates stability and growth in its income statement.85
Very Positive
Balance Sheet
The balance sheet of NetEase reflects a strong equity position with a favorable equity ratio and a manageable debt-to-equity ratio, suggesting a conservative leverage strategy. The return on equity is impressive, indicating effective utilization of shareholder funds to generate profits. However, the total debt has shown fluctuations, which might pose moderate risks in financial stability.78
Positive
Cash Flow
NetEase's cash flow statement is robust with consistently strong operating cash flow and free cash flow growth. The operating cash flow to net income ratio is healthy, indicating efficient cash generation relative to net income. Free cash flow to net income ratio is also favorable, demonstrating the company's ability to generate cash after capital expenditures, supporting further investments and dividend payments.80
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 105.30B | 103.47B | 96.50B | 87.61B | 73.67B | Gross Profit |
| 65.81B | 63.06B | 52.77B | 46.97B | 38.98B | EBIT |
| 29.58B | 27.71B | 19.63B | 16.42B | 14.54B | EBITDA |
| 32.00B | 30.76B | 22.49B | 19.69B | 18.00B | Net Income Common Stockholders |
| 29.70B | 29.42B | 20.34B | 16.86B | 12.06B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 137.58B | 126.72B | 117.46B | 97.53B | 93.47B | Total Assets |
| 195.99B | 185.92B | 172.76B | 153.64B | 141.87B | Total Debt |
| 12.23B | 20.48B | 27.53B | 20.63B | 19.50B | Net Debt |
| -39.15B | -945.42M | 2.64B | 6.13B | 10.39B | Total Liabilities |
| 53.50B | 57.84B | 63.89B | 54.37B | 58.88B | Stockholders Equity |
| 138.69B | 124.29B | 104.73B | 95.33B | 82.13B |
| Cash Flow | Free Cash Flow | |||
| 38.40B | 31.06B | 25.07B | 21.82B | 21.60B | Operating Cash Flow |
| 39.68B | 35.33B | 27.71B | 24.93B | 24.89B | Investing Cash Flow |
| 17.92B | -17.04B | -7.37B | -7.08B | -29.19B | Financing Cash Flow |
| -27.34B | -21.47B | -10.24B | -12.59B | 9.91B |
NetEase Technical Analysis
Positive
102.78
Price Trends
97.96
Positive
91.18
Positive
89.47
Positive
Market Momentum
0.46
Positive
55.72
Neutral
68.49
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTES, the sentiment is Positive. The current price of 102.78 is above the 20-day moving average (MA) of 101.44, above the 50-day MA of 97.96, and above the 200-day MA of 89.47, indicating a bullish trend. The MACD of 0.46 indicates Positive momentum. The RSI at 55.72 is Neutral, neither overbought nor oversold. The STOCH value of 68.49 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for NTES.
NetEase Risk Analysis
NetEase disclosed 94 risk factors in its most recent earnings report. NetEase reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
NetEase Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $166.40B | 11.79 | 48.55% | ― | 84.13% | 122.96% | |
79 Outperform | $63.50B | 16.16 | 22.60% | 2.36% | 0.23% | -0.09% | |
79 Outperform | $73.25B | 11.75 | 17.55% | 1.68% | 1.88% | 49.67% | |
72 Outperform | $2.67B | 15.71 | 3.99% | ― | -1.94% | ― | |
71 Outperform | $32.90B | 10.14 | 9.37% | ― | -2.60% | 19.69% | |
60 Neutral | $8.85B | ― | -9.43% | ― | 11.73% | 47.68% | |
59 Neutral | $30.54B | 0.25 | -13.23% | 4.04% | 2.36% | -49.53% |
* Communication Services Sector Average
Performance Comparison
NTES
NetEase
102.78
-0.76
-0.73%
BIDU
Baidu
94.80
-6.49
-6.41%
YY
JOYY
48.84
18.96
63.45%
JD
JD
42.29
16.93
66.76%
BILI
Bilibili
24.10
11.49
91.12%
PDD
PDD Holdings
119.92
8.03
7.18%
NetEase Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: -0.16% | Next Earnings Date: May 27, 2025
Earnings Call Sentiment Positive
NetEase demonstrated strong revenue growth and successful game launches, particularly with Marvel Rivals and the return of Blizzard games in China. Youdao achieved its first annual operating profit, indicating positive financial developments. However, there were declines in revenue for Youdao learning services, NetEase Cloud Music, and innovative businesses. Lower gross profit margins for games also present a challenge. Overall, the highlights and achievements outweigh the challenges, reflecting a generally positive sentiment.Highlights
Record Revenue Achieved
NetEase achieved a total net revenue of RMB 105.3 billion in 2024, with RMB 83.6 billion from games and related services, marking the 22nd consecutive year of revenue growth from online games operations.
Marvel Rivals Success
The launch of Marvel Rivals was a major success, reaching the number one spot on Steam's top seller chart within four hours and accumulating over 40 million players.
Where Winds Meet Launch
Where Winds Meet reached 50 million players within two weeks of its launch, topping iOS download charts and driving engagement with its innovative gameplay.
Blizzard Game Returns
The return of Blizzard games to China was highly successful, with World of Warcraft and Hearthstone generating strong momentum.
Strong Performance of PC Client Games
PC client games achieved 17% year-over-year growth, with a 57% increase in Q4, driven by titles like Naraka: Bladepoint and Westward Journey Online II.
Youdao's First Annual Operating Profit
Youdao achieved its first-ever annual operating profit in 2024, with a 10% year-over-year increase in operating profit in Q4.
Lowlights
Decline in Youdao Learning Services Revenue
Learning services revenue for Youdao declined by 9.5% year-over-year in the fourth quarter as the company focused on balancing revenue and profitability.
Decrease in NetEase Cloud Music Revenue
NetEase Cloud Music's net revenue decreased by 5% year-over-year in the fourth quarter, reflecting lower revenue from social entertainment services.
Decline in Innovative Business Revenue
Revenue from innovative businesses and others decreased by 17% year-over-year in the fourth quarter.
Lower Gross Profit Margins in Games
Gross profit margin for games decreased to 66.7% in the fourth quarter, down from 69.5% in the same period last year, due to a higher proportion of revenue from licensed games.
Company Guidance
During the NetEase 2024 Fourth Quarter and Fiscal Year 2024 Earnings Conference Call, the company provided detailed guidance on its financial and operational performance. Total net revenue for 2024 reached RMB 105.3 billion, with games and related value-added services contributing RMB 83.6 billion, both marking record highs. The company emphasized its commitment to innovation and global market expansion, highlighting the success of its game titles like Marvel Rivals, which amassed over 40 million players and topped Steam's charts. NetEase's PC client games achieved a 17% year-over-year growth, and mobile games accounted for about 73% of the total net revenue from online games for the full year. The company also reported a 31% year-over-year increase in non-GAAP net income attributable to shareholders for the fourth quarter, totaling RMB 9.7 billion. Additionally, it announced a dividend of US$1.22 per ADS and repurchased approximately RMB 21.2 million ADS. The call underscored the company's strategic focus on high-quality content, operational excellence, and sustainable long-term growth.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.