NetEase is a Good Buy Going Into Earnings
Chinese stocks have been performing very well as of late and with NetEase’s (NTES) earnings due this week, I think buying the stock can be a good trade this month. For those who don’t know about NetEase, the company, through its subsidiaries, operates an interactive online community in the People’s Republic of China. The company operates in three segments: Online Game Services; Advertising Services; and E-mail, E-commerce and Others. It offers massively multi-player online role-playing games and mobile games; and distributes its point cards to gamers across China.NetEase’s earnings are due on 11th of November.
Given the positive sentiments surrounding the Chinese economy in the recent weeks, I expect NetEase to beat the estimates and move higher after earnings. Apart from the e-commerce market, video games sales in China are growing as well. Alibaba has managed to benefit from this trend as the company released stunning earnings earlier this month.
Investors can expect NetEase to report similar numbers as the company gained traction on its e-commerce, and mobile games initiatives. The company is also expected to benefit from its ongoing licensing deal to allow its users to play "World of Warcraft" from Activision Blizzard.
China is a massive market for gaming, however the industry is slowly maturing. NetEase has managed to stay on its toes by diversifying its revenue streams. The company recently splashed $2.5 million to partner with Finnish game developer Reforged Studios. In addition, NetEase also invested in new Silicon Valley offices where a research team is creating mobile games for Western markets.
The company has managed to stay ahead of the game by diversifying and this will help the company report a stunning quarter this time around as well.
Although I am still skeptical of China’s economy, I think NetEase would make for a good long trade going into earnings. All signs point toward a good earnings report for NetEase and as a result, I expect the stock to move higher after earnings. Though I’m not a trader, I think buying NetEase going into earnings can yield good profits. However, I would still recommend investors to sell the stock a few days after the earnings so as to book profits.