Chinese game maker Perfect World (PWRD) reported third quarter earnings Monday. The company saw revenue and net income decrease from last year's period. Shares are likely to trade down during Tuesday's session, offering a nice buy in price for patient shareholders.
Revenue from the third quarter was $110.7 million. Last year, the company reported third quarter revenue of $112.8 million. Gross profit dropped to $90.2 million from last year's $93.5 million. Net income decreased to $13.7 million from $22.8 million. The company reported diluted earnings per share of $0.28 per American Deposit Share.
During the third quarter, Perfect World entered beta testing of "Return of the Condor Heroes" in China. The game was released at the end of the quarter and will hit revenue in the fourth quarter. Perfect World also released "Torchlight 2" in September of 2012. Expansion packs were released for already existing games "Zhu Xian" and "Perfect World II".
The big upcoming launch of "Neverwinter" could be a huge catalyst for shares of Perfect World. "Neverwinter" is a MMORPG game based on Dungeons and Dragons. The popular game will get the virtual treatment in 2013. The highly anticipated game was showcased at the 2011 E3 Festival and the 2012 Pax East 2012, where it took home the "Best of Show" award. An initial North American launch is coming in early 2013.
While the company posted declines in revenue and profits, no major new games were released. The company saw only two expansion packs released and a couple of weeks of the newest game in China. Fourth quarter revenue could be the sign of good things to come before several games are released in 2013.
The company expects fourth quarter revenue of $105.2 to $110.7 million. With the company expecting the same earnings from today's down quarter, a fourth quarter beat could be coming. As revenue come in from pay to download "Return of the Condor Heroes", Perfect World could see shares rise. Shares are down 8.3% in the last year, and down more than 60% in the last two years. Recently, I recommended buying shares of Perfect World for less than $11, as the company could see $20 after new games are released.