Leave it to NetEase.com
The Chinese Web-based gaming pioneer came through with another monster quarter last night. Net revenue soared 61% to $209.3 million, with net income climbing 49% to $0.67 per ADS. Analysts were only banking on a profit of $0.63 for each depositary share with a top line of $202.7 million.
It's easy to see why the pros undershot reality. This hasn't been a scintillating sector outside of NetEase. Earlier this week, Giant Interactive
NetEase has a big advantage. It recently became the licensee of Activision Blizzard's
Somebody's going to do it -- so why not NetEase?
However, NetEase is rocking along nicely regardless of Activision Blizzard's fantasy role-playing juggernaut. Despite being several years old, its flagship Fantasy Westward Journey online game is as popular as ever. There's also some healthy online advertising sizzle here.
Before it became a major player in China's online gaming realm, NetEase was best known for its mainstream online portal. It's doing quite well, with online advertising revenue growing 88% over last year's third quarter. It only represents 11% of NetEase's total revenue, but it clearly outpaced the 62% top-line growth from its bread-and-butter online gaming business.
NetEase closed out the quarter with $1.3 billion in cash on its balance sheet, or roughly $10 per ADS.
One has to wonder why NetEase is stockpiling so much money. It would be nearly enough for it to buy its choice of Giant Interactive, Shanda Games
Then again, when you're already the best, what's the point in acquiring the best? It's hard to fault NetEase. No one in China plays the gaming game any better.
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Netease.com is a Motley Fool Rule Breakers selection. Activision Blizzard is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a synthetic long position on Activision Blizzard. The Fool owns shares of 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.
Longtime Fool contributor Rick Munarriz has been a fan of China's high-margin online stocks for a long time. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.