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Shares of Giant Interactive Group Inc. reached a 52-week high of $11.61 per share on Mar 6 after it reported impressive fourth quarter 2013 results a day before. Shares of Giant Interactive eventually closed at $11.54 on Mar 6, with share prices rising 3.1% year-to-date.

Growth Drivers

On Mar 6, Giant Interactive, one of China’s leading online game developers, delivered solid fourth quarter and full-year 2013 results.

Fourth quarter 2013 adjusted earnings of 29 cents increased 23.1% year over year (on a local currency basis) and also beat the Zacks Consensus Estimate by 26.1% on the back of top-line growth and strong margins.

Net revenue of $99.9 million was in line with the Zacks Consensus Estimate and increased 5.8% year over year (on a local currency basis), driven by an increase in the demand for online games. Gross profit also increased 8.9% year over year to $88.7 million on account of higher sales.

In full year 2013, the company’s earnings of $1.03 per share increased 10.7% (on a local currency basis) and beat the Zacks Consensus Estimate of 93 cents by 10.8%. Net revenue grew 9.5% (on a local currency basis) driven by double-digit annual growth in online game revenues. Revenues also beat the Zacks Consensus Estimate of $386 million.

In 2013, the company launched World of Xianxia, an online game, which has successfully expanded its portfolio without cannibalizing the sales of existing games. In addition, the company successfully diversified into new growth areas such as web games and mobile games.

The company is optimistic about expanding its portfolio in 2014 and hopes to launch several new mobile games. The company has a prudent expense management system and it continues to explore other cost effective distribution channels to enhance profitability.

Giant Interactive holds a Zacks Rank #2 (Buy). Investors interested in Internet retailers can also consider stocks like WebMD Health Corp. (WBMD - Snapshot Report), YY Inc. (YY - Snapshot Report) and China Distance Education Holdings Limited (DL - Snapshot Report). While WebMD Health and YY sport a Zacks Rank #1 (Strong Buy), China Distance Education Holdings holds a Zacks Rank #2.

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