Sina Technology News, February 16 evening Beijing Time, Credit Suisse today released a research report rating NetEase stock as "Outperform" and raised the target price to $64.0.
The following is the full text of the report:
Excluding impairment, NetEase's fourth-quarter revenue exceeded our expectations by 10%. Non-GAAP diluted earnings per share were $1.2, 4% higher than our forecast. This is mainly due to: 1) higher-than-expected advertising revenue; 2) gradually increasing online game revenue; 3) lower tax rates. The company's results already include an impairment charge of $50.3 million related to the licensing fee for "StarCraft II".
In the fourth quarter of last year, NetEase's gaming business margin increased from 71.5% to 72.6%, mainly due to a higher contribution from self-developed games. The gross margin of the advertising business increased from 48.4% to 54.5% due to operational reasons. Due to higher marketing expenses and R&D costs, NetEase's operating profit margin declined.
NetEase will begin testing two new self-developed games in the middle of 2012. NetEase is also looking for new growth drivers, including a new social gaming platform, online video, and enterprise services. The launch of new games will be the main catalyst for NetEase's performance in 2012.
Due to better-than-expected results in the fourth quarter, we have raised our earnings per share forecasts for NetEase in 2012 and 2013 by 4%, respectively. Therefore, we have raised NetEase's target price from $61.5 to $64.0 (opening an account with Chengdu Securities Company). We reiterate our "Outperform" rating on NetEase stock. (Zhang Fan)