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J.P. Morgan Securities raised NetEase’s (NASDAQ:NTES) estimates after strong performance of Justice Mobile/Racing Master, and reiterated the company’s stock as top pick in China online gaming sector.
J.P. Morgan analysts raised their 2023/24E EPS for NetEase by 5%/7%, respectively after the successful launch of Justice Mobile/Racing Master. The firm also raised its December-24 price target for NetEase’s stock to HK$185, compared to HK$180 previously.
The firm expect NetEase’s online game revenue year-over-year growth to accelerate from 8% in Q1/Q2’23 to 14%/23% in Q3/Q423, steered by strong performance of new games.
The analysts think the solid performance of Justice Mobile/Racing Master (currently number 3/number 5 rank in China iOS top grossing list) shows NTES’ capability to achieve leadership in new vertical game genres (such as car racing), which make the analysts more positive on its future growth outlook in the global game market with bigger TAM.
The firm also notes NetEase’s efforts to create a better game experience for casual gamers, which can extend the life cycle for its new/existing games (as seen by the long life cycle of Eggy Party), and helps with a sustainable long-term game revenue growth.
The analysts expect NetEase to report in-line Q2’23 print (most new games launched at the end of June), but anticipate 3%/8% upside in Q3/Q4 game revenue versus consensus.
NetEase’s share price has risen 43% YTD, and the analysts expect outperformance to sustain. The firm reiterated NTES as its top pick in China online gaming.
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