A recent report by Citigroup highlights that while NetEase's (NTES, Financial) third-quarter revenue and net profit fell short of expectations, the company continues to demonstrate its capability in developing and launching high-quality games. Upcoming releases like "The Sound of Yanyun" and the 6v6 shooter game "Marvel Duel" are expected to act as short-term catalysts for the stock price. Additionally, the rapid rebound of the PC game "Fantasy Westward Journey," along with the strong performance of games such as "Identity V," "Justice," "Naraka: Bladepoint," and "Eggy Party," supports the outlook for improved gaming revenue as 2025 approaches.
Citigroup has raised its target price for NetEase’s ADR from $108 to $115, maintaining a "buy" rating due to attractive valuation, strong cash flow, and consistent shareholder returns. The bank sees the rebound of "Fantasy Westward Journey" and positive reviews of "Naraka: Bladepoint," coupled with the launch of "Marvel Duel," as strong investment rationale for stable earnings visibility next year.
The resilience of NetEase's current game lineup and the excitement around new game releases have led Citigroup to increase its revenue forecasts for the next two years by 1.1% and 3.2%, respectively. However, it has slightly reduced non-GAAP profit projections by 2.9% for the current year and by less than 0.1% for the next year, considering the third-quarter results and management's commentary on existing game performance and future new releases.
