Goldman Raises Price Target on Perfect World (PWRD) as Margins Pick up and Outlook Games On

May 24, 2011 1:42 PM EDT
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Price: $20.17 --0%

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Goldman Sachs is reiterating its Buy rating on shares of Perfect World (NASDAQ: PWRD) while it raises its price target from $28 to $34 on strong Q1 earnings.

The company's revenue rebounded 22% as recent game releases have been experiencing solid sales. The firm believes that Forsaken World demonstrates PWRD's 3D game development capability.

The firm comments that the company's Q2 revenue guidance of 0%-5% Q/Q decline reflects the absence of TV/drama revenue and less aggressive monetization efforts. It forecasts that revenue will pick back up in the second half with the release of Heaven Sword and Dragon Saber in the summer and Swordsman OL in Q4.

PWRD's margins experienced a slight rebound in Q1 as promotional expenses were scaled back for the previous quarter, but marketing expenses are anticpated to pick back up in Q2 with the launch of Heaven Sword and Dragon Saber. The firm estimates an op margin ex-SBC of 38.2% in 2011.

The company announced that several games are currently under development for launch in 2012-2014, mostly MMOs in various genres, but did not provide more details.

Goldman is raising its 2011, 2012, and 2013 non-GAAP EPS estimates by 12%, 10%, and 19%.

For more ratings news on Perfect World click here and for the rating history of Perfect World click here.

Shares of Perfect World closed at $23.95 yesterday.

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