NetEase (NTES) AI Stock Analysis

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NetEase

(NASDAQ:NTES)

79Outperform

NetEase's strong financial performance, positive earnings call sentiment, and attractive valuation contribute to a strong overall stock score. While technical analysis reflects some mixed signals, the company's consistent growth and strategic focus support a positive outlook.

Positive Factors

Earnings

Shareholder return beat: 4Q24 DPADS was US$1.22 (67% payout ratio, better than MSe of 44%) and buyback of US$300mn during the quarter.

Game Development

More than 1.4 million gamers have made appointments to join the relaunch of Condor Heroes.

Revenue Growth

The return of Blizzard titles and new releases is driving strong growth in PC games, with expectations for continued robust performance in FY25.

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.

Non-game Business

Revenue was below expectations due to weaker non-game business.

Revenue Expectations

Revenue fell short of consensus expectations mainly due to weaker performance in mobile games.

NetEase (NTES) vs. S&P 500 (SPY)

Market Cap

$66.23B

Dividend Yield2.79%

Average Volume (3M)1.40M

Price to Earnings (P/E)15.5

Beta (1Y)0.40

Revenue Growth0.23%

EPS Growth-0.09%

CountryUS

Employees29,128

SectorCommunication Services

Sector Strength73

IndustryElectronic Gaming & Multimedia

Share Statistics

EPS (TTM)6.41

Shares Outstanding644,493,800

10 Day Avg. Volume1,123,980

30 Day Avg. Volume1,398,064

Financial Highlights & Ratios

PEG Ratio20.71

Price to Book (P/B)N/A

Price to Sales (P/S)4.37

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

$117.72

Price Target Upside28.84% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering9

NetEase Business Overview & Revenue Model

Company DescriptionNetEase, Inc. (NTES) is a leading Chinese technology company that operates primarily in the sectors of online services, internet technology, and media. Established in 1997, the company has built a robust ecosystem encompassing online gaming, e-commerce, advertising services, email services, and other internet services. NetEase is particularly renowned for its online gaming division, which develops and publishes some of the most popular mobile and PC games in China, as well as its strategic partnerships with international gaming companies.

How the Company Makes MoneyNetEase primarily generates revenue through its online gaming sector, which accounts for the majority of its earnings. The company develops, operates, and licenses a wide array of games, including MMORPGs, mobile games, and casual games, catering to diverse consumer preferences. In addition to self-developed titles, NetEase also collaborates with global gaming leaders like Blizzard Entertainment to distribute and operate popular franchises in China. Another significant revenue stream comes from its e-commerce platforms, such as NetEase Yanxuan, which leverages a direct-to-consumer model to sell a variety of lifestyle products. Advertising services and other value-added services, such as premium email and music streaming subscriptions, also contribute to NetEase's revenue. The company's diverse business model and strategic partnerships are key factors in its financial performance.

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

Very Positive

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.

Balance Sheet

Positive

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.

Cash Flow

Positive

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.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
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

Technical Analysis Sentiment

Negative

Last Price91.37

Price Trends

50DMA

101.32

Negative

100DMA

95.95

Negative

200DMA

90.63

Positive

Market Momentum

MACD

0.56

Negative

RSI

61.56

Neutral

STOCH

87.37

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTES, the sentiment is Negative. The current price of 91.37 is below the 20-day moving average (MA) of 100.94, below the 50-day MA of 101.32, and above the 200-day MA of 90.63, indicating a neutral trend. The MACD of 0.56 indicates Negative momentum. The RSI at 61.56 is Neutral, neither overbought nor oversold. The STOCH value of 87.37 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NTES	79 Outperform	$66.23B	15.48	22.60%	2.79%	0.23%	-0.09%
EA	74 Outperform	$35.27B	34.44	14.04%	0.56%	-2.99%	-0.46%
BILI	66 Neutral	$6.30B	―	-9.43%	―	17.42%	72.64%
TTWO	62 Neutral	$34.86B	―	-51.45%	―	1.00%	-148.89%
PLTK	62 Neutral	$1.75B	10.67	-220.61%	8.60%	-0.69%	-31.96%
Sector *	58 Neutral	$25.04B	3.23	-10.53%	4.39%	2.30%	-43.13%
RBLX	54 Neutral	$35.34B	―	-628.33%	―	28.68%	22.57%

* Communication Services Sector Average

Performance Comparison

NTES

NetEase

91.37

-5.42

-5.60%

Electronic Arts

132.53

3.91

3.04%

TTWO

Take-Two

196.25

44.13

29.01%

BILI

Bilibili

14.88

3.20

27.40%

PLTK

Playtika Holding

4.54

-2.04

-31.00%

RBLX

Roblox

51.22

11.42

28.69%

NetEase Earnings Call Summary

Earnings Call Date: Feb 20, 2025 | % Change Since: -11.24% | 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.