The Beijing Olympics may have ended, but China is still playing games. Online gaming pioneer Shanda Interactive
Revenue grew by 48% to $122.1 million, while earnings clocked in at $0.56 per American depositary share. The bottom line fell, but only because Shanda booked a big one-time gain last year from selling its stake in SINA
If the numbers lead you to a dizzying deja vu moment, it only means that you were paying attention three months ago. Shanda also earned $0.56 a share during the first quarter, against an analysts' target of $0.51 a share.
Shanda has now topped the market's profit expectations in each of the past nine quarters. Is Shanda that good, or are Wall Street's finest that bad? The question is rhetorical, but Shanda's interactive success is not.
The company closed out the quarter with 4.2 million paying accounts. Flush with $513.2 million in cash and short-term investments -- or nearly $7 per ADS -- Shanda is positioned to weather any storm, or make the most of sector consolidation if it tires of its still-heady organic growth.
This summer, the company launched Shanda Literature, its initiative to cash in on online original literature in China. It's still in the early stages, but if Amazon.com's
Perhaps more importantly, Shanda lived up to the hype -- and in most cases outperformed -- its smaller rivals during a quarter that could have been challenging, given the Sichuan earthquake and the three-day mourning period that followed.
In other words, the booming industry saved the best for last. It is why Shanda shareholders were rewarded with a 7% pop at the open this morning. With Shanda -- like so many of its peers -- fetching an earnings multiple in the pre-teens, there is little reason to expect the good times to end as long as China keeps playing along.
Other games to play:
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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 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.