Are Chinese Gaming Stocks Fairly Priced?

Includes: MLCO, NTES
by: Emerging Money

Some reports out there are promoting what we have been saying: That growth is strong out there and that it is playing into names across the consumer sector.

By this point, a solid fourth quarter already seems to be already priced into shares of Macau casino operator Melco Crown Enterprises (MPEL). EBITDA is up 30% in the fourth quarter, and while analysts are still behind the curve, the stock has also jumped 30% since we first alerted you to it at the end of February.

For a perhaps less sophisticated Chinese gaming experience, Netease (NASDAQ:NTES) is focusing its online game development efforts squarely at the Chinese market.

The company is exposed to massive growth opportunities — and gross margins were a whopping 81% last year — but the stock is still up only 16% since the end of February. Valuation is still reasonable. NTES is only trading at 16 times 2011 expected earnings. This one will be having the crowds calling its name soon.

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