NetEase: TX2 Has Strong Open Beta Debut

| About: NetEase, Inc (NTES)

Tian Xia II (TX2) had a strong open beta debut. NetEase (NASDAQ:NTES) launched the open beta testing of its 3D game TX2 on Sunday, September 20. According to my tracking in the chart below, TX2 reached 227500 Peak Concurrent Users (PCU) on Sunday, surging 24% from 185000 in Saturday. During the peak time of Sunday, TX2's overall server utilization rate was about 90%, indicating that average popularity per server remained high despite the aggressive expansion of total capacity from 35 to 51 servers (up 46%) since last Friday.

NetEase's stock poised to benefit from analysts raising forecasts and ratings. I believe TX2's revenue will likely surpass $15 million in 4Q09, significantly above Wall Street's average forecast. In addition, the commercialization of World of Warcraft (WoW) in China on September 19 has eliminated the largest overhang for NetEase's stock. Currently, 21 analysts are covering NTES (Source: Yahoo! Finance). I believe these two breaking events (TX2's strong open beta debut and WoW's commercialization) during last weekend will cause most analysts to raise their earnings forecasts and target prices on NTES. In addtion, I expect several analysts will raise their ratings on NTES from neutral to positive. These upward revisions will provide strong support for NetEase's stock price during 4Q09.

Game tracking methodology. My tracking methodology is based on these articles: Article 1; Article 2; Article 3. If you have any suggestions on improving the tracking, feel free to contact me.

Disclosure: No positions

Chart: PCU and ACU Trends of Tian Xia II in 3Q09


Source: Tracking by Xiaofan Zhang

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Tagged: , Internet Software & Services, China
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