From The China Stock Blog (permission granted):
Extracts from notes by ThinkEquity analyst Jason Tsai, and Goldman's
James Mitchell, evaluating NetEase's (ticker: NTES) earnings:
....Despite demonstrating theGoldman Sachs:
ability to effectively reinvigorate its core franchises through
expansion packs, we remain concerned with the growing competitive
environment and the title line up beyond current games. The stock has
had a nice run despite our rating, and we believe it could trade higher
on the strong quarter, but we are maintaining our Source of Funds
rating and increasing our price target to $48 from $40 which reflects
18x our FY05 EPS (10% taxed) estimate of $2.69.
....ForFor access to both research reports, see here.
2Q05, management guided revenue +18% qoq (games up 18%-20% qoq), and
profit +26% qoq. We raise our 2005 forecast diluted EPS by 3% to $2.45;
keep 2006 EPS unchanged; and introduce 2007 estimates. We have an IL
rating and a 12-month target price of US$50 based on 22X 2006 forecast
diluted EPS. We believe risks are moving to the downside given: (1) the
launch of rival games during the quarter; (2) Netease's low spending on
marketing/R&D and reluctance to license big budget games, reminding
us of the smaller Korean game developers; (3) the possibility that
Netease is capitalizing costs for Fly For Fun (FFF), a game that it may
not commercially release.