NetEase, Inc (ADR) (NTES), Activision Blizzard, Inc. (ATVI): World of Warcraft’s Decline Cannot Hold This Company Back

So, it’s not surprising that NetEase is also moving in the same direction as it intends to release a couple of expansion packs for its games next month apart from the two it released last month. Going forward, NetEase has a first-person shooter game and Legend of Tibet, a massively multiplayer online role playing game, in the works.

Looking at mobile
In addition, the company is also looking to make its presence felt in mobile games, and smartly moved into the platform introducing a mobile version of Fantasy Westward Journey II. Management says that NetEase will be launching “several mobile games” in the next few months. NetEase will be looking to leverage the popularity of its existing self-developed titles by introducing them for mobile devices, and it will release new mobile games as well.

The push into mobile is important, as mobile gaming in China is estimated to grow at a brisk pace of 26.3% annually through 2015, according to Sino Market Insight. As such, NetEase, Inc (ADR) (NASDAQ:NTES) is making the right move by focusing on developing its mobile portfolio. But, competition is expected to be intense in this space, with the likes of TENCENT HOLDINGS ADR (OTCMKTS:TCEHY) betting big on mobile.

TENCENT HOLDINGS ADR (OTCMKTS:TCEHY) is one of the biggest game operators in China and is the provider of the popular WeChat service. Recently, it introduced a new feature for WeChat that would enable users to play freemium games (free to play but users need to pay for in-game purchases). Moreover, management says that TENCENT HOLDINGS ADR (OTCMKTS:TCEHY) won’t spare any expense in buying game developers and developing more free-to-play content, as told to Reuters.

But, the mobile gaming market is a pretty big one in China and it could easily accommodate more than one company. If NetEase’s mobile games click, then there would be even more upside in store for investors.

The bottom line
Even after appreciating strongly this year, NetEase still trades at a reasonable trailing P/E of 15, and a forward P/E of 12 indicates that analysts are expecting earnings growth. Moreover, the way management executed the strategy of building its own games and trim down dependence on World of Warcraft is laudable, and there are some solid reasons for investors, as outlined above, to expect NetEase to perform even better in the future.

The article World of Warcraft’s Decline Cannot Hold This Company Back originally appeared on Fool.com and is written by Harsh Chauhan.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and NetEase.com. The Motley Fool owns shares of Activision Blizzard.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.