NTES Stock Analysis – A Concise Report for Investors

Now trading at a price of $99.18, NetEase has moved -5.3% so far today.

NetEase returned gains of 25.0% last year, with its stock price reaching a high of $118.9 and a low of $80.79. Over the same period, the stock underperformed the S&P 500 index by -3.0%. The company's 50-day average price was $99.56. NetEase, Inc. engages in online games, music streaming, online intelligent learning services, and internet content services businesses in China and internationally. Based in Hangzhou, China, the Large-Cap Technology company has 29,128 full time employees. NetEase has offered a 17.4% dividend yield over the last 12 months.

Strong Revenue Growth but Slimmer Gross Margins than the Industry Average of 70.92%:

2017 2018 2019 2020 2021 2022
Revenue (M) $6,556 $9,768 $8,509 $11,290 $13,747 $13,991
Gross Margins 61% 42% 53% 53% 54% 55%
Net Margins 25% 10% 36% 17% 19% 21%
Net Income (M) $1,667 $942 $3,078 $1,890 $2,664 $2,877
Net Interest Expense (M) $43 $87 $63 $113 $111 $123
Depreciation & Amort. (M) $123 $303 $375 $530 $514 $414
Diluted Shares (M) 3,315 3,255 3,250 3,350 3,367 3,296
Earnings Per Share $0.5 $0.27 $0.94 $2.75 $0.79 $0.89
EPS Growth n/a -46.0% 248.15% 192.55% -71.27% 12.66%
Avg. Price $54.89 $47.05 $48.95 $78.16 $101.44 $92.85
P/E Ratio 109.78 168.04 51.53 27.91 126.8 103.17
Free Cash Flow (M) $1,544 $1,584 $2,299 $3,653 $3,660 $3,713
CAPEX (M) $283 $368 $174 $162 $251 $305
Current Ratio 2.61 1.96 2.23 2.31 2.24 2.32

NetEase has rapidly growing revenues and a flat capital expenditure trend and generally positive cash flows. Additionally, the company's financial statements display an excellent current ratio of 2.32 and a strong EPS growth trend. However, the firm has slimmer gross margins than its peers.

an Exceptionally Low P/B Ratio but Priced Beyond Its Margin of Safety:

NetEase has a trailing twelve month P/E ratio of 15.6, compared to an average of 35.0 for the Technology sector. Based on its EPS guidance of $8.06, the company has a forward P/E ratio of 12.4. According to the 48.8% compound average growth rate of NetEase's historical and projected earnings per share, the company's PEG ratio is 0.32. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 21.0%. On this basis, the company's PEG ratio is 0.74. This suggests that its shares are undervalued. Additionally, the market is possibly undervaluing NetEase in terms of its equity because its P/B ratio is 0.51 whereas the sector average is 7.92. The company's shares are currently trading 933.1% below their Graham number.

Analysts Give NetEase an Average Rating of Buy:

The 27 analysts following NetEase have set target prices ranging from $116.91 to $146.39 per share, for an average of $134.76 with a buy rating. The company is trading -26.4% away from its average target price, indicating that there is an analyst consensus of strong upside potential.

The largest shareholder is Ninety One UK Ltd, whose 1% stake in the company is worth $636,144,786.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.