Analyzing the Market Sentiment for NTES

By Susan Ramirez • Monday, October 14 15:12 • Permanent Link

One of the standouts of today's afternoon trading session has been NetEase, which logged a -3.7% drop and underperformed the S&P 500 by -5.0%. The Software stock is now trading at $85.12 per share and is -26.56% below its average target price of $115.91. Analysts have set target prices ranging from $82.15 to 156.91 dollars per share, and have given the stock an average rating of buy.

The market seems to share this rosy outlook, since NetEase has a short interest of only 1.1%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.

When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.

We can make inferences about the market sentiment surrounding NetEase by analyzing its rate of institutional ownership. If institutions such as hedge funds and pension funds are the primary shareholders of a corporation, it most likely means that its shares are a good investment according to those institutions' analysts.

At 11.8%, the rate of institutional ownership is average, indicating that a sufficient number of institutions have concluded that it is a stable investment. Beware, however, that the rate of institutional ownership could also indicate an ongoing proxy battle or takeover attempt -- so you should also periodically check the news about a stock whose institutional ownership you are tracking.

Overall, there is positive market sentiment towards NetEase because of an analyst consensus of strong upside potential, a buy rating, a very low short interest, and a very small number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.

At a glance, here are some essential statistics you may want to know about NTES:

It has trailing 12 month earnings per share (EPS) of $6.26 per share
NetEase has a trailing 12 month Price to Earnings (P/E) ratio of 13.6 while the S&P 500 average is 29.3
The company has a Price to Book (P/B) ratio of 0.42 in contrast to the S&P 500's average ratio of 4.74
NetEase is a Technology company, and the sector average P/E and P/B ratios are 30.01 and 3.91 respectively

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.