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In a report published Monday, Morgan Stanley reiterated its Overweight rating on Shanda Games
GAME, but slightly lowered its price target from $5.80 to $5.50.
Morgan Stanley noted, “GAME's 2Q sales dropped 14% YoY, hurt by the weaker core games performance. Despite stronger seasonality, 3Q sales are expected to drop 4-5% QoQ (down 20-21% YoY). The company is in a product cycle transition, where its new potential ‘hits', such as RIFT, may rekindle its growth...What we liked: 1) GAME enjoys a deep game portfolio of 39 titles, with 19 new games in the pipeline. 2) Thanks to the better cost control, its operating costs dropped 20% QoQ and YoY. Its operating margin grew 4ppts YoY to 31%. 3) Net cash of US$480mn accounts for over half of its market value. It may further buyback US$86mn of shares (~9% of its market value).”
Shanda Games closed on Friday at $3.33.
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