NetEase ( NASDAQ: NTES ) is up 6.3% out of Wednesday's stock market open as J.P. Morgan upgraded the game maker to Overweight from Neutral, seeing a buying opportunity in a new game launch cycle.
The stock is down 8%-plus since its fourth-quarter report alongside some profit-taking in Chinese Internet names, analyst Daniel Chen noted.
But tomorrow brings the launch of mobile game Westward Journey Returns, kicking off a new cycle that will result in another nine games this year (seven in China, two overseas), he pointed out. (The firm is also more positive on the sustainability of Eggy Party after some resilience following the lunar new year; it's reached 30M daily active users, good for fourth-biggest mobile game in China.)
That should "more than offset the decline of certain legacy titles (a major investor concern)," Chen said.
The firm expects NetEase's game revenue growth to accelerate from 1% in the fourth quarter to 8%/9% year-over-year in the second and third quarters respectively.
Meanwhile, any share price downside is supported by a $5B stock buyback program, amounting to 10% of the company's market cap.
For more detail, dig into the earnings presentation and Seeking Alpha's transcript of NetEase's Q4 earnings call .
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NetEase jumps 6% as J.P. Morgan upgrades on coming game launches