Pali Research Upgrades Netease.com (NTES) to Buy; Valuation Call

November 2, 2009 8:07 AM EST

Pali Research upgrades Netease.com (Nasdaq: NTES) from Neutral to Buy. Price target

Pali analyst says, "The stock has been weak recently on concerns that operations of WOW could be halted by the General Administration of Press and Publication (GAPP) amid its power struggle with the Ministry of Culture (MoC). GAPP and MoC are two regulatory bodies for the online game industry in China. However, we believe concerns are overblown and it is highly unlikely that GAPP will take any action against WOW. In addition, we believe NTES’ business fundamentals remain strong and we expect its game business to grow in 3Q09 driven by FWWJ and strong seasonality. We also believe FWWJ growth could continue into 4Q09 from an expansion pack launch and full quarter revenue contribution from TX2 (launched 9/20). The stock is currently trading at only 13X 2010 consensus EPS, significantly below “fair valuation” multiple at 15.5X."

"For 2009, we are raising our revenue and EPS estimates to $557.3M and $2.07, respectively from $523.3M and $1.99. For 2010, our revenue estimate goes to $835.0M from $683.6M and EPS estimate goes to $2.92 from $2.65."

To see more analyst ratings on NTES Click Here.

NetEase.com, Inc., through its subsidiaries, operates an interactive online community in China; and provides Chinese language content and services through online games, Internet portal, and wireless value-added services (WVAS) businesses.

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