1. NetEase, Inc. (NASDAQ:NTES)
Average Price Target Upside: 42.01%
Number of Hedge Fund Holders: 35
NetEase, Inc. (NASDAQ:NTES) is a provider of internet and gaming services, known for creating premium content. It operates a wide range of popular mobile and PC games, both in China and globally. It has one of the largest internal R&D teams for mobile, PC, and console games.
The company integrates culture and education into its games and aims to create a more engaging and informed world. In addition to gaming, it also has key subsidiaries including Youdao, an intelligent learning platform, Cloud Music, a popular online music service, and Yanxuan, its private label lifestyle brand.
NetEase (NASDAQ:NTES) new releases have been quite popular among the masses as the multiplayer game, Once Human, saw over 230,000 peak users on Steam, while Naraka: Bladepoint Mobile hit number three on the iOS grossing chart in the second quarter. Established titles like Fantasy Westward Journey also performed well, achieving record-high quarterly revenue.
The company continued to improve its gaming portfolio, with new updates to Justice Mobile and future releases like Where Winds Meet and Marvel Rivals. The company remains committed to expanding its global reach through partnerships and innovative content.
On October 14, NetEase (NASDAQ:NTES) announced Destiny: Rising, a free-to-play mobile sci-fi RPG shooter set within an alternate timeline of the Destiny universe, licensed by Bungie. This new game offers players a rich narrative set in the post-Dark Age era, with a variety of playable hero characters, dynamic gameplay modes, and a blend of single, co-op, and multiplayer experiences.
NetEase (NASDAQ:NTES) tops our list of best communications stocks to buy according to analysts. On October 7, The Fly reported that Macquarie raised its price target for the company from $120 to $125 while maintaining an Outperform rating. The firm expects more growth for China’s internet sector and noted that stock valuations are still at half of Q1 2023 levels despite improved fundamentals.
The firm highlighted that China’s economic policies and careful corporate strategies boost earnings potential for 2025. Macquarie also pointed out that local services, e-commerce, and travel sectors offer strong value at a discount.
The company is also one of the most profitable gaming stocks with a TTM net income of $4 billion and a 5-year net income CAGR of nearly 27%.
Polen Capital stated the following regarding NetEase, Inc. (NASDAQ:NTES) in its first quarter 2024 investor letter:
“NetEase, Inc. (NASDAQ:NTES) is one of the top players in China’s video game industry and saw decent revenue growth in 2023, particularly in its games division, with profit growth close to 20%. The stock also continues to recover after gaming restrictions announced last quarter in China were not nearly as bad as first feared.”
While we acknowledge the potential of NetEase, Inc. (NASDAQ:NTES) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NTES but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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