Perfect World's Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of China-based online gaming outfit Perfect World (Nasdaq: PWRD  ) scored a jackpot this morning, soaring up to 21.8% overnight on heavy, heavy volume.

So what: The company reported second-quarter earnings this morning, and investors love the results. Sales of $120.6 million comfortably beat the $108 million analyst consensus, and adjusted earnings of $1.01 per depositary share absolutely crushed the $0.57 average estimate.

Now what: Perfect World also annihilated expectations three months ago as the company continued to tap into a burgeoning Chinese middle class. In the words of CEO Michael Chi: "With the continued rise of the number of Internet users in China, it is highly likely that the online gamer population in China will also continue to grow rapidly."

Heavily invested in MMORPG franchises that would feel familiar to players of Activision Blizzard (Nasdaq: ATVI  ) hit World of Warcraft, Perfect World is positioned for years of incredible growth as Chinese gamers jump online. The presence of local rivals Shanda Interactive (Nasdaq: SNDA  ) and NetEase (Nasdaq: NTES  ) might scare investors, but there's plenty of room for many players to grow in this potentially enormous market.

Interested in more info on Perfect World? Add it to your watchlist.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Motley Fool owns shares of Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard and Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

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  • Report this Comment On August 23, 2011, at 7:18 PM, ViDLuV wrote:

    Made a wopping $131USD ont the pop with 50 shares at $18.33. Shoulda gone in with $100k. Shoulda coulda woulda!

    What i noticed is that it drops below the pop a few days or weeks after its earning report. Why is that the case - is it the company investors are unsure of or is it just the markets volitility?

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