Staying ahead of your competition is the best way to dominate a multiplayer fantasy game. The same goes for Chinese online gaming giant NetEase (Nasdaq: NTES). The company behind the popular Fantasy Westward Journey knows this particular game all too well. After last night's blowout report, NetEase has clocked in ahead of Wall Street's profit targets in all but one of the past 13 quarters.
Earnings per ADS climbed 20% higher, to $0.30. Revenue rose 11% to hit 540 million RMB ($69.2 million). Analysts were expecting profit growth to dip for the period, with a top-line rising by only half that amount.
The Internet has a long way to go to penetrate the Chinese market, but those who've already discovered the interactive platform have taken a shine to massive multiplayer games. That's helped propel shares of companies like NetEase, Shanda (Nasdaq: SNDA), and The9 (Nasdaq: NCTY) to new heights.
NetEase isn't one to rest on its laurels. More than 1.3 million gamers were playing Fantasy Westward Journey simultaneously this past quarter, and the sequel is drawing nearly half as many fans. A third installment will begin beta-testing in a couple of months.
NetEase has other games in the hopper; Tianxia II will go into open beta-testing later this week. Naturally, it's important to keep the new games coming, since online game accounts for 84% of the company's revenue. Net margins are now checking in at a jaw-dropping 59.2%.
This doesn't mean that the company has lost sight of its original model of wireless entertainment services, nor its online portal. NetEase is rolling out an updated search engine to help grow its online advertising business. It may never be a Baidu.com (Nasdaq: BIDU), but it doesn't hurt to try.
Keeping its options open by jamming its foot into any open door? Come to think of it, that's another way to win the game, too.
Game on with further Foolishness:
NetEase, Shanda, and Baidu.com are all active recommendations in the
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Longtime Fool contributor Rick Munarriz has been a fan of China's high-margin gaming stocks for a long time. He is also part of the
Rule Breakers
newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the companies in this story. The Fool has a disclosure policy.
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