Brean Capital Analysts See NetEase Continuing To Gain Market Share

NetEase Inc (ADR) NTES appears well positioned for the growth opportunities presented by China’s mobile game market and is likely to gain further share in this market, Brean Capital’s Fawne Jiang said in a report. He initiated coverage of the company with a Buy rating and a price target of $235.

NetEase is the second-largest online game player in China, and the online gaming business is likely to continue to be a core growth driver for the company, analyst Fawne Jiang mentioned. While mobile games should continue to thrive, PC games should be relatively stable.

Revenue Growth In 2H

In 2015, NetEase reported 1039 percent y/y revenue growth, due to the success of two mobile games - Fantasy Westward Journey and Westward Journey Online. Fawne expects the company to be able to sustain its revenue growth in 2H16, on the back of continued strength of FWJ and WWJ as well as a strong game pipeline.

“Moreover, we see potential opportunities could be unleashed in cross-border ecommerce, mobile monetization and international expansion, which could offer additional optionality on the stock down the road,” the analyst wrote. He added further that NetEase would likely generate an earnings CAGR of +20 percent over the next three years.

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