NetEase Proves It’s the One Chinese Stock Everyone Should Own

Chinese tech giant NetEase Inc (NASDAQ:NTES) proved in its latest earnings report that it’s a one-of-a-kind company that all investors should consider for their portfolios.

From The Motley Fool:

NetEase’s second-quarter results once again dramatically exceeded the high expectations that investors had from the online gaming specialist. Revenue nearly doubled in local-currency terms, hitting $1.35 billion, which was far greater than the $1.26 billion consensus forecast among those following the stock. Similarly, NetEase posted impressive bottom-line performance, with adjusted net income of $484.6 million reflecting a roughly 100% increase in earnings as measured in China’s currency. Adjusted earnings per American depositary share of $3.70 more than doubled the year-ago figure and exceeded expectations by more than $1 per share.

The company’s growth in all of its segments was highly impressive:

Revenue from online game services climbed by more than three-quarters to $969 million, and sales generated by email, e-commerce, and other types of revenue more than quadrupled from year-ago levels to nearly $300 million. The advertising services sector posted more modest growth of about 25%, but it has become an insignificant source of revenue for NetEase over the years.

NetEase is also expanding beyond the Chinese markets, and its mobile presence has grown to meet consumer demand.

NetEase has captured a huge share of the growing mobile gaming market, with more than 100 titles that include several strong franchises. Many titles have become popular not just in China but also in South Korea, and NetEase has the potential to become much more of a regional powerhouse as it looks at its overall expansion strategy.

At the same time, NetEase isn’t content with what it has achieved thus far. The company is also looking at virtual reality and similar new offerings to see how it can develop content that will lead NetEase forward in the future. Collaboration with the creator of the popular Minecraft game to develop a Chinese version of the program also has NetEase excited about its position in the market.

Finally, NetEase is one of the few Chinese tech plays you’ll find that pays a dividend. The company distributed $0.78 per ADR share to investors in Q2. Unlike most U.S. companies, NTES doesn’t have a consistent payout level. Instead, it ties its distributions directly to net income — so the more money the company makes, the more investors make too.


NetEase shares fell $5.83 (-2.73%) to $207.50 in afternoon trading today. Year-to-date, the stock has gained 14.5%, more than doubling the pace of the S&P 500 in the same period.

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