Perfect World Shares Got Crushed: 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 Chinese online gaming specialist Perfect World (Nasdaq: PWRD  ) plunged 18% Thursday after the company lowered its current-quarter outlook.

So what: Perfect World has been crushed over the past several months on concerns over the lifecycle of its games, and today's downside guidance -- management now expects third-quarter revenue of $109.8 million versus its previous forecast of $118.3 million -- only reinforces those fears. In fact, the shares are hitting a new 52-week low on the news and are down 45% over the past year.

Now what: I'd look into this pullback as a possible buying opportunity. While the lowered sales guidance is disappointing, it still represents year-over-year growth of 21% to 28% for its core online business. With the shares trading at a clear P/E discount to rivals like NetEase (Nasdaq: NTES  ) and Shanda (Nasdaq: SNDA  ) , Perfect World already seems heavily priced for imperfection.

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

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of NetEase. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On September 15, 2011, at 3:04 PM, chadscards1274 wrote:

    Don't forget PWRD is also a company that last I checked has around $5 a share in cash on it's balance sheet with no debt. Given today's drop this means now the stock is only being valued at about $9 if you subtract it's cash on hand.

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