Perfect World (PWRD) is an online game developer and operator in China and is regarded as a bellweather for China’s online gaming export industry. It exports games to approximately 60 countries and has licensed them in 11 countries to leading operators. Domestically, China has over 338 million of its people using the internet.
Fundamentally, Hillbent assigns a proprietary grade of "A" to PWRD, with "A" being the strongest on a scale of "A" to "E". The stock trades at only 15.5 PE and at 0.4 PEG and is projected to grow its 2009 earnings and sales at respective rates of 25% and 20%. IBD ranks its industry group # 31 out of more than 200 groups.
On Monday, PWRD appeared on the radar of one of Hillbent’s technical analysis screens for which strong volume is a key prerequisite. Volume was up +125% vs. average volume and up +258% vs. last Friday’s volume to signal fresh buying demand for its shares. However, caution should be heeded as the shares are trading at the upper range of its channel and are up +21% over the last 5 trading sessions on +31% increase in aggregate 5 day volume. I would anticipate and prefer a pullback and some price consolidation.
In summary, investors patient enough to wait for a pull-back to at least the $31-$32 range will be presented with a tremendous buying opportunity. Otherwise, tight stops or the selling of out of the money naked or covered puts are recommended for those who insist upon having immediate exposure to this growth monster.
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