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What's in Store for NetEase (NTES) This Earnings Season?

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NetEase’s NTES fourth-quarter 2019 results are expected to reflect the positive impact of an expanding online gaming portfolio.

The availability of Activision Blizzard’s (ATVI - Free Report) World of Warcraft Classic in China (launched in the third quarter) is expected to have aided subscriber growth in the to-be-reported quarter.

However, a weak advertising market in China, increasing government regulations related to gaming and stiff competition from Tencent TCEHY are expected to have negatively impacted the top line.  

For the fourth quarter, the Zacks Consensus Estimate for revenues currently stands at $2.16 billion, suggesting a decline of 25.3% from the figure reported in the year-ago quarter.

Moreover, the consensus mark for fourth-quarter earnings has been steady at $3.02 per share over the past 30 days, indicating growth of 13.5% from the year-ago quarter’s reported figure.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. The four-quarter beat is 144.7%, on average.

NetEase, Inc. Price and EPS Surprise

NetEase, Inc. Price and EPS Surprise

NetEase, Inc. price-eps-surprise | NetEase, Inc. Quote


Let’s see how things are shaping up for this announcement.

Factors to Consider

NetEase’s diversified online gaming portfolio is expected to have been a major contributor to the top line in the to-be-reported quarter.

The top line is expected to reflect benefits from the launch of new titles in the third quarter like Cyber Hunter, Xuan Yuan Sword: Dragon Upon the Cloud and Bloom & Blade.

Moreover, the increased popularity of flagship title Fantasy Westward Journey Online is expected to have benefited NetEase’s subscriber growth.

Further, expanding international presence with titles like Knives Out, Identity V and Life-After is noteworthy.

Additionally, increased efforts to monetize NetEase Cloud Music are expected to have driven Innovative business and the others segment’s top line. Notably, in the third quarter, the company entered into a definitive agreement for an approximately $700-million investment in NetEase Cloud Music by Alibaba BABA and Yunfeng.

However, a weak online advertising environment is expected to have hurt NetEase Cloud Music’s top line in the fourth quarter.

Zacks Rank

NetEase currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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