When investors decide whether to buy a stock, they typically prefer investor-friendly companies that disclose sufficient data and information to facilitate investment analysis. Applying this rule to Chinese online gaming stocks, I think NetEase (NASDAQ:NTES) is the most investor-friendly company in this industry. I have listed three reasons:
- NetEase is the only Chinese online gaming company that discloses key games' quarterly PCU and ACU. Peak Concurrent Users (PCU) and Average Concurrent Users (ACU) are the best indicators for a game's popularity and user loyalty. Chinese online gaming companies typically do not disclose detailed PCU and ACU for any single game. The only exception in the industry is NetEase, whose earnings conference calls disclose quarterly PCU and ACU for FWWJ and WWJ2, its two flagship games (The9 used to disclose details of WoW, but the game is now operated by NetEase). Moreover, NetEase regularly announces milestone PCUs for these two games. Based on these announcements, investors can easily analyze drivers of NetEase's stock.
- NetEase is one of the few Chinese online gaming companies that disclose quarterly cash flow statements. As one of the three major financial statements, cash flow statement is frequently used by savvy investors to discover valuable information. Although cash flow statement can be derived from balance sheet and income statement, providing it directly saves investors a lot of time. NetEase is one of the few companies in the industry that provide this statement directly. From the cash flow statement, investors can quickly see NetEase's strong ability to generate cash every quarter.
- NetEase is honest about its games' weaknesses. When its games have problems, NetEase normally chooses to disclose it instead of hiding it. A perfect example is the way NetEase handled the recent large-scale server merger in its 2D game Westward Journey Wai Zhuan. NetEase frankly admitted the game's problems in its official announcements (1, 2, 3), and patiently answered players' questions in the game's official forum.
Disclosure: No positions