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The US and China have agreed to keep their current trade truce in place until January 10. This extension comes as Chinese President Xi Jinping arrives in Washington for a state visit, suggesting a period of stability in the often tense relationship between the two countries.
For NetEase, a calmer trade environment reduces the risk of sudden rules or tariffs that can hurt Chinese tech companies with global ambitions. While this does not change the company's core gaming business, it provides a more stable backdrop for its efforts to grow its player base and launch new games in markets outside of China.
Source: CNBC
The leaders of the US and China are scheduled to meet at the White House this Thursday. They aim to maintain a trade agreement that has kept new tariffs and restrictions at bay, but that deal is currently set to end in November.
For NetEase, a stable relationship between the two countries is helpful for its global plans. The company is currently trying to grow its gaming business outside of China and relies on partnerships with US firms like Blizzard to bring popular titles to Chinese players. Any progress toward a long-term truce reduces the risk of sudden regulations or trade barriers that could disrupt those cross-border deals.
Source: Reuters
Bernstein set its price target at $160 per share. This is roughly in line with the $162 average across all firms that follow the company. Even after a recent drop in the stock price, analysts generally see the business as worth more than its current market value. This target suggests about 30 percent upside from today's price.
Source: Bernstein
NetEase reported quarterly revenue of about 4.4 billion dollars, which was slightly higher than the 4.3 billion dollars analysts expected. However, its earnings per share of $1.77 fell well short of the $2.31 target. The core gaming division, which makes up the vast majority of the business, grew about 7 percent compared to last year.
The profit miss is the main concern here. While the company is successfully growing its sales and its partnership with Blizzard is bringing major titles back to China, it is spending more to get those results. For long-term owners, the focus remains on whether NetEase can keep its older, high-profit games stable while it spends to launch new titles globally.
Management has struggled to set a predictable bar lately, missing analyst profit targets in three of the last four quarters as the business hits a choppy patch.
| Expectation | |
|---|---|
| EPS | $2.44 |
| Revenue | $4.51B |