The play's the thing, and by that, I mean game play. Motley Fool Rule Breakers pick ShandaInteractive
Shanda reported that second-quarter earnings increased 58% to $26.9 million, or $0.36 per American depositary share. Revenues increased 88% to $65.2 million. Online game revenues increased 72% to $56.4 million. Other revenues, which include online advertising -- an area that is seen as yet another growth catalyst in gaming -- increased 365% on a year-over-year basis.
Shares of Shanda took a hit in trading today. True, Shanda missed the consensus estimate of Wall Street analysts by $0.02, but since the earnings included two one-time charges, pessimism seems pretty unwarranted.
Regardless of short-term stock machinations, companies that play in the video game space seem to have an extremely bright future, particularly in China and other Asian countries. Both Shanda and its rival NetEase
Video games, including massively multiplayer online role-playing games (MMORPGs) -- also known by the less tongue-twisting name of "virtual worlds" -- are enjoying a surge in interest among people from all walks of life. They're fast going beyond the old view of a video game and becoming mainstream entertainment options for their cinematic elements, competitive challenges, and, last but certainly not least, their social aspects. I can personally vouch for their sheer addictive nature, too, considering the fact that I spend maybe a little bit too much time playing one with a few friends and a whole slew of strangers from around the globe.
For Shanda and NetEase, though, it goes a bit further. Rule Breakers analyst Charly Travers made the point to me that in Asia, video games are the equivalent of our professional sports, to give a little extra perspective on their popularity. Maybe you've run across strange news stories about video game addiction in Asia (several recent news headlines pop to my mind, such as the young man who reportedly died after a 50-hour gaming marathon in South Korea or the increasing prevalence of clinics aimed at treating video game addiction).
Maybe some investors were so impressed by rival NetEase's earnings last weekthat they gave Shanda the cold shoulder today. There's also the fact that Shanda shares have doubled over the last year, which could explain some cold feet out there.
Regardless, our Rule Breakers service has made the point that there's plenty of room for both these companies in China's huge and growing video game market -- a given since both these companies are picks. Considering the idea that there are exciting things ahead for the industry and the region, it very well could be that today, Shanda's on sale.
For more Foolish analysis of the Asian video game craze, click on:
- China is shining on, if you looked at NetEase's earnings report last week.
- Rick Munarriz recently offered up three reasons to get in the game.
- A few months ago, China was waiting on Warcraft.
Alyce Lomax does not own shares of any of the companies mentioned.