Investors in Chinese gaming stocks have seen some pretty impressive earnings reports lately. Giant Interactive
It dropped the punch bowl.
The company behind China's popular Fantasy Westward Journey earned $0.30 per American depositary share during the first quarter, just below the $0.32 a share it earned a year ago and the $0.31 that analysts were expecting.
That's close, but we're not playing horseshoes here. NetEase still missed, and the miss underscores an otherwise solid report.
Revenue climbed 18% to $93.0 million, on the strength of a 15% boost in its online gaming business (now 85% of the revenue mix), a strong 38% surge in online advertising, and a 13% uptick in its previously moribund wireless value-added services arm. Wall Street was looking for only $82.3 million the top line.
Investors shouldn't read too much into the bottom-line miss, because like most companies, NetEase is paying a higher tax rate in China this year. NetEase's pretax profits actually improved by 15%, in line with its revenue gain.
If there is any consolation for NetEase, it's that it fared better than CDC
The software maker, which also posted quarterly results last night, reported a small loss despite a 12% increase in revenue from continuing operations. CDC runs the China.com portal and is making a stab at the seemingly crowded online-gaming niche in China, but its bread-and-butter business remains selling corporate software solutions outside China, the country.
As for the state of online gaming, we have one more bellwether to go. Shanda Interactive
NetEase came up short, but with nearly $5 a share in cash and growing again in a high-margin niche, it can't keep this party quiet for too much longer.
