Giant Interactive Is Definitely on Its Game

When your name is Giant Interactive (NYSE: GA ) , investors expect big things out of you.

Giant is living up to the billing. Last night the company posted a first-quarter profit of $0.20 per American depositary share, with revenue soaring 49%, to $67.3 million. Wall Street's sleepy analysts were looking for earnings of only $0.16 a share on $63.1 million.

ZT Online continues to be a cyberspace smash, with as many as 1.5 million gamers playing at the same time. Giant rolled out an expansion pack during the quarter, introducing a social-networking element into the fantasy fighting game where gamers play alongside other gamers who live nearby in the real world.

ZT won't have to fight alone, since Giant Online -- the company's second internally developed multiplayer game -- rolled out to the public in open beta at the end of March.

The pipeline will keep cranking out product through the end of the year, including a new ZT Online expansion pack as well as overseas developed titles King of Kings III and Empire of Sports.

Giant's solid numbers set a welcome tone for the wave of upcoming reports. Perfect World (Nasdaq: PWRD ) and The9 (Nasdaq: NCTY ) report on Monday. NetEase.com (Nasdaq: NTES ) steps up on Wednesday. Pioneer Shanda Interactive (Nasdaq: SNDA ) reports the following week.

Remember when China was cracking down on Internet cafes last year and limiting the amount of time that minors could spend in multiplayer fantasy games?

Few seem to be doubting China's leading multiplayer-game makers these days. Since bottoming out two months ago, Giant's shares have soared nearly 80%. Those kinds of gains make it hard for a stock to live up to the hype in the near term -- and shed a light on a dip in stock price following the report -- but Giant's growing role in high-margin gaming will help in the long run.

China definitely appears to be the place for online gaming companies, as South Korea's Webzen (Nasdaq: WZEN ) and Gravity (Nasdaq: GRVY ) are fading in the low single digits.

Giant is attracting an average of 546,000 players to its games at any given time. The company's paying user base is now at 1.5 million, and that's a committed crew who snap up prepaid game cards and in-game point purchases in order to play the games.

Giant may not be a household name outside of China, but when you're reaching the masses in the world's most populous nation, you must be doing something right.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

NetEase and Shanda were recommended to Motley Fool Rule Breakers subscribers a couple of years ago. Find out how to play the growth-stock game with a free 30-day trial subscription offer today.

Longtime Fool contributor Rick Munarriz has been a fan of China's high-margin gaming stocks for a long time. He is 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.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.