Pali Expects Regulatory Issues For NTES To be Resolved Soon

Analysts at Pali maintained their “buy” rating on NetEase.com Inc (NASDAQ: NTES), while reducing their estimates for the company. The target price is set to $45.

NTES posted its Q3 net revenues of $127.2 million, substantially short of the estimates and the consensus. NTES’ EPS for the quarter also missed the estimates and the consensus. According to Pali, the miss was the result of the consensus over-estimating revenues from World of Warcraft (WOW) and under-estimating costs associated with WOW. Pali expects NTES’ results for Q4 to continue to be affected due to points carried over by gamers from previous operator.

Pali expects the growth in NetEase.com’s in-house developed games to accelerate in 4Q09 and 1Q10, driven by TX2, FWWJ expansion pack and the launch of two games. With NTES aggressively searching for a solution, Pali expects the regulatory issues related to WOW to be resolved in the near term.

Pali reduced its GAAP EPS estimate for 2009 from $2.07 to $2.03.