On Tuesday, Morgan Stanley maintained a positive outlook on NetEase.com (NASDAQ:NTES), reaffirming an Overweight rating with a steady stock price target of $150.00. The firm's optimism is based on anticipated strong performance due to new product launches and robust earnings projections for the online gaming company.
The analyst from Morgan Stanley cited several factors contributing to the favorable assessment of NetEase. Notably, the impending release of new games such as "Condor Heroes" set for March 28, and "Naraka: Bladepoint Mobile" expected in the second quarter of 2024, are predicted to spark a positive consensus EPS revision cycle. The licensing for "Naraka: Bladepoint Mobile" was secured on February 27, with testing slated to commence on April 1.
Another contributing factor to the positive outlook is the performance of "Eggy Party," which has effectively held its ground against competing titles. During the recent Chinese New Year holiday, "Eggy Party" achieved a daily active user count exceeding 40 million, outperforming "DreamStar."
Furthermore, Morgan Stanley anticipates that NetEase will exceed profit expectations for the fourth quarter of 2023, with the results to be announced on February 29. The firm also speculates on the potential near-term re-entry of Blizzard into the market, which could serve as an additional catalyst for NetEase's stock performance.
The valuation of NetEase is considered attractive at 13 times the estimated 2024 earnings per share, which is above the consensus estimates detailed in the January 16, 2024, report titled "NetEase, Inc: Potential Surprises in 2024." Morgan Stanley estimates a very likely probability, between 70% and 80%, that NetEase will experience the anticipated positive scenario.
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