12 Cheap Chinese Stocks to Buy According to Hedge Funds

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6. NetEase, Inc. (NASDAQ:NTES)

Number of Hedge Fund Holders: 35

Forward P/E Ratio: 10.54

NetEase, Inc. (NASDAQ:NTES) is a Chinese technology firm with a major presence in the e-gaming segment. The company operates through four business segments including the Online Game Service, Youdao, Cloud Music, and NetEase Live.

The gaming segment of the company is well-established and is known for Westward Journey, the Onmyoji series, and others. NetEase’s gaming division has a portfolio of over 100 game products and strategic collaborations with leading gaming firms. The company also provides games licensed from external game creators. Other segments such as Youdao offer intelligent learning services, while NetEase Live provides advertising services via high-end email and other value-added services.

Earlier in March 2024, the company partnered with Sandsoft Games to establish a joint venture to expand its game publishing and esports activities in the MENA region. Saudi Arabia is one of the fastest-growing economies, and it is widely investing in gaming sectors, which gives NetEase an opportunity.

NetEase underperformed in the third quarter of 2024 as the company’s earnings fell short of analysts’ estimates. The company missed consensus estimates mainly due to concerns regarding the core gaming segment’s competitiveness. However, the PC games segment was the highlight with growth in net revenue which improved 29% from a year ago and 30% compared to last quarter.

NetEase is also focused on its AI-driven subscription services which have experienced six consecutive quarters of rapid sales expansion, with nearly 200% year-over-year growth in Q2. NTES currently has a forward P/E of 10.54 and is trading at a discount of almost 18% compared to its sector median of 13.83.

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