NetEase, Inc. Just Missed Earnings - But Analysts Have Updated Their Models
Investors in NetEase, Inc. (HKG:9999) had a good week, as its shares rose 4.3% to close at HK$202 following the release of its second-quarter results. Results overall were not great, with earnings of CN¥2.17 per share falling drastically short of analyst expectations. Meanwhile revenues hit CN¥30b and were slightly better than forecasts. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on NetEase after the latest results.
Taking into account the latest results, the current consensus from NetEase's 31 analysts is for revenues of CN¥120.7b in 2026. This would reflect a credible 3.5% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to step up 13% to CN¥11.53. In the lead-up to this report, the analysts had been modelling revenues of CN¥120.9b and earnings per share (EPS) of CN¥12.32 in 2026. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
See our latest analysis for NetEase
The consensus price target held steady at HK$250, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on NetEase, with the most bullish analyst valuing it at HK$309 and the most bearish at HK$161 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The period to the end of 2026 brings more of the same, according to the analysts, with revenue forecast to display 7.1% growth on an annualised basis. That is in line with its 6.4% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 7.3% per year. It's clear that while NetEase's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at HK$250, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple NetEase analysts - going out to 2028, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.