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NetEase (NTES)
NASDAQ:NTES
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NetEase
(NASDAQ:NTES)
Rating:85Outperform
Price Target:
$152.00
▲(19.14%Upside)
Positive Factors
Financial Performance
Operating profit increased by 37% YoY, mainly due to disciplined operational expense control.
New Game Titles
Several highly-anticipated game titles are lined up for global launch, which is expected to boost future growth.
Shareholder Returns
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.
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.
Revenue Expectations
Revenue fell short of consensus expectations mainly due to weaker performance in mobile games.
NetEase (NTES) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$84.39B
Dividend Yield2.02%
Average Volume (3M)887.64K
Price to Earnings (P/E)19.1
Beta (1Y)0.54
Revenue Growth1.26%
EPS Growth6.84%
CountryUS
Employees26,028
SectorCommunication Services
Sector Strength83
IndustryElectronic Gaming & Multimedia
Share Statistics
EPS (TTM)2.44
Shares Outstanding644,493,800
10 Day Avg. Volume539,711
30 Day Avg. Volume887,638
Financial Highlights & Ratios
PEG Ratio1.92
Price to Book (P/B)4.07
Price to Sales (P/S)0.00
P/FCF Ratio14.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$135.65Price Target Upside6.33% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering10
NetEase Business Overview & Revenue Model
Company DescriptionNetEase, Inc. engages in online games, music streaming, online intelligent learning services, and internet content services businesses in China and internationally. The company operates through Games and Related Value-Added Services; Youdao; Cloud Music; and Innovative Businesses and Others segments. It develops and operates PC and mobile games, as well as offers games licensed from other game developers. The company's products and services include Youdao Dictionary, an online knowledge tool; Youdao Translation, a tool specifically designed to support translation needs of business and leisure travelers; U-Dictionary, an online dictionary and translation app; Youdao Kids' Dictionary, a smart and fun tool; smart devices, such as Youdao Dictionary Pen, Youdao Smart Learning Pad, and Youdao Listening Pod; online courses; interactive learning apps; and education digitalization solutions, such as Youdao Smart Learning Terminal, a device that automates paper-based homework processing; Youdao Smart Cloud, a cloud-based platform that allows third-party app developers, smart device brands, and manufacturers to the company's OCR capabilities; and Youdao Sports, a sports-centric educational system. Its products and services include NetEase Cloud Music, a music streaming platform; Yanxuan, an e-commerce platform, which sells private label products; www.163.com portal and related mobile app, Wangyi Xinwen, which deliver information such as news, sports events, technology, fashion trends, and online entertainment; NetEase Mail, an email service; NetEase CC Live streaming, a live streaming platform with a focus on game broadcasting; and NetEase Pay, a payment platform. The company was formerly known as NetEase.com, Inc. and changed its name to NetEase, Inc. in March 2012. NetEase, Inc. was founded in 1997 and is headquartered in Hangzhou, the People's Republic of China.
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 Key Performance Indicators (KPIs)
Any
Gross Margin by Segment
Reveals the efficiency of each segment in generating profit relative to costs, helping investors assess competitive strength and pricing power within specific markets.
Reveals the efficiency of each segment in generating profit relative to costs, helping investors assess competitive strength and pricing power within specific markets.
Data provided by:
Main Street Data
Main Street DataNetEase Earnings Call Summary
Earnings Call Date:May 15, 2025
(Q1-2025)
| % Change Since: 19.76%|
Next Earnings Date:Aug 14, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong revenue growth in gaming and positive momentum for new and existing titles. However, it also acknowledged challenges in revenue for Youdao, NetEase Cloud Music, and innovative businesses. The positive aspects, particularly in gaming and ESG achievements, outweigh the lowlights.Q1-2025 Updates
Positive Updates
Strong Start to 2025
NetEase began 2025 with strong momentum, reporting a total net revenue increase of 7% year-over-year, driven by innovative content and exceptional operations.
Gaming Revenue Growth
Total revenue from gaming and value-added services rose by 12% year-over-year to RMB24.0 billion, with new titles and flagship games achieving record highs.
Successful Game Launches
Marvel Rivals and FragPunk both saw strong initial success, with Marvel Rivals reclaiming #1 on Steam's global top seller chart and FragPunk achieving over 110,000 peak concurrent players within three days of its PC launch.
Identity V and Naraka: Bladepoint Achievements
Identity V reached a new quarterly high in player base, surpassing 400 million globally, while Naraka: Bladepoint saw record revenue, and both games were named as official Esports events for the 2026 Asian Games.
Youdao Record High Operating Profit
Youdao achieved record high first quarter operating profit, driven by a focus on technology-driven innovation and long-term sustainability.
ESG and Sustainability Recognition
NetEase achieved a 16% reduction in greenhouse gas emissions compared to the previous year, and received upgraded ESG ratings from MSCI to AA, among other recognitions.
Negative Updates
Decline in Youdao and NetEase Cloud Music Revenue
Youdao's net revenues declined by 7% year-over-year, and NetEase Cloud Music net revenues decreased by 8% from the same period last year, attributed to strategic structural improvements and decreased revenue from social entertainment services.
Challenges in Innovative Businesses
Net revenue for innovative businesses and others decreased by 17% year-over-year, largely due to decreased net revenue from Yanxuan, advertising services, and other segments.
Company Guidance
During the first quarter of 2025 earnings call, NetEase reported a 7% year-over-year increase in total net revenue, reaching RMB28.8 billion. Revenue from gaming and value-added services rose by 12% to RMB24.0 billion. Notably, Marvel Rivals and FragPunk contributed to this growth, with Marvel Rivals reclaiming its #1 position on Steam's global top seller chart and FragPunk achieving over 110,000 peak concurrent players shortly after launch. The company emphasized its commitment to innovation and global expansion, with new titles like Once Human quickly gaining traction across platforms. NetEase's non-GAAP net income grew by 32% year-over-year to RMB11.2 billion, demonstrating strong operational capabilities and strategic foresight in expanding its global gaming footprint.NetEase Financial Statement Overview
Summary
NetEase demonstrates excellent financial health with strong profitability, efficient operations, and robust cash flow management. Its low leverage profile and consistent growth across key financial metrics underscore its financial strength.Income Statement
NetEase shows strong growth and profitability in its TTM period, with a Gross Profit Margin of 62.7% and a Net Profit Margin of 30.2%. Revenue growth is stable, with a healthy increase of 1.9% from the previous year. The EBIT Margin is robust at 30.2%, and the EBITDA Margin is strong at 32.4%, indicating efficient operations and cost management.92
Very Positive
Balance Sheet
The company maintains a strong financial position with a low Debt-to-Equity Ratio of 0.07, indicating minimal reliance on debt financing. The Return on Equity stands at an impressive 22.5%, showcasing effective use of equity capital. The Equity Ratio is solid at 71.6%, reflecting a strong asset position relative to liabilities.88
Very Positive
Cash Flow
NetEase exhibits a strong cash flow position with a Free Cash Flow Growth Rate of 6.7% for the TTM period. The Operating Cash Flow to Net Income Ratio is 1.3, demonstrating effective conversion of net income to cash. The Free Cash Flow to Net Income Ratio is also high at 1.2, indicating strong cash generation relative to net income.90
Very Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 107.27B | 105.30B | 103.47B | 96.50B | 87.61B | 73.67B |
| Gross Profit | 67.27B | 65.81B | 63.06B | 52.77B | 46.97B | 38.98B |
| EBITDA | 34.73B | 32.00B | 30.76B | 22.49B | 19.69B | 18.00B |
| Net Income | 32.36B | 29.70B | 29.42B | 20.34B | 16.86B | 12.06B |
Balance Sheet | ||||||
| Total Assets | 200.86B | 195.99B | 185.92B | 172.76B | 153.64B | 141.87B |
| Cash, Cash Equivalents and Short-Term Investments | 140.11B | 137.58B | 126.72B | 117.46B | 97.53B | 93.47B |
| Total Debt | 9.82B | 12.82B | 20.48B | 27.53B | 20.63B | 19.50B |
| Total Liabilities | 52.99B | 53.50B | 57.84B | 63.89B | 54.37B | 58.88B |
| Stockholders Equity | 143.83B | 138.69B | 124.29B | 104.73B | 95.33B | 82.13B |
Cash Flow | ||||||
| Free Cash Flow | 39.99B | 37.47B | 31.06B | 25.07B | 21.82B | 21.60B |
| Operating Cash Flow | 42.23B | 39.68B | 35.33B | 27.71B | 24.93B | 24.89B |
| Investing Cash Flow | -7.78B | 17.92B | -17.04B | -7.37B | -7.08B | -29.19B |
| Financing Cash Flow | -35.13B | -27.34B | -21.47B | -10.24B | -12.59B | 9.91B |
NetEase Technical Analysis
Neutral
127.58
Price Trends
122.27
Positive
111.20
Positive
100.11
Positive
Market Momentum
2.79
Positive
53.20
Neutral
31.79
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTES, the sentiment is Neutral. The current price of 127.58 is below the 20-day moving average (MA) of 131.97, above the 50-day MA of 122.27, and above the 200-day MA of 100.11, indicating a neutral trend. The MACD of 2.79 indicates Positive momentum. The RSI at 53.20 is Neutral, neither overbought nor oversold. The STOCH value of 31.79 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
85 Outperform | $84.39B | 19.14 | 23.93% | 2.02% | 1.26% | 6.84% | |
72 Outperform | $71.18B | ― | -460.30% | ― | 30.24% | 27.61% | |
71 Outperform | $9.27B | ― | -4.29% | ― | 21.11% | 87.93% | |
70 Outperform | $38.35B | 35.95 | 16.13% | 0.50% | -0.81% | -9.28% | |
64 Neutral | $1.85B | 13.15 | -220.61% | 8.11% | 1.64% | -32.31% | |
61 Neutral | $40.40B | -0.91 | -12.15% | 3.89% | 2.03% | -69.70% | |
57 Neutral | $43.03B | ― | -114.76% | ― | 5.31% | -15.57% |
* Communication Services Sector Average
Performance Comparison
NTES
NetEase
127.58
38.28
42.87%
EA
Electronic Arts
151.30
6.75
4.67%
TTWO
Take-Two
235.33
83.81
55.31%
BILI
Bilibili
21.77
4.15
23.55%
PLTK
Playtika Holding
4.89
-2.27
-31.70%
RBLX
Roblox
105.03
66.51
172.66%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.