Yahoo Finance NetEase, Inc. Just Missed EPS By 5.8%: Here's What Analysts Think Will Happen Next
There's been a notable change in appetite for NetEase, Inc. (NASDAQ:NTES) shares in the week since its full-year report, with the stock down 11% to US$110. It looks like the results were a bit of a negative overall. While revenues of CN¥74b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 5.8% to hit CN¥18.01 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. 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.
View our latest analysis for NetEase
After the latest results, the 28 analysts covering NetEase are now predicting revenues of CN¥89.3b in 2021. If met, this would reflect a major 21% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to bounce 27% to CN¥23.11. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥87.3b and earnings per share (EPS) of CN¥24.67 in 2021. So it's pretty clear consensus is mixed on NetEase after the latest results; whilethe analysts lifted revenue numbers, they also administered a small dip in per-share earnings expectations.
There's been no major changes to the price target of CN¥848, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on NetEase, with the most bullish analyst valuing it at CN¥162 and the most bearish at CN¥88.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the NetEase's past performance and to peers in the same industry. The analysts are definitely expecting NetEase's growth to accelerate, with the forecast 21% growth ranking favourably alongside historical growth of 16% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect NetEase to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for NetEase. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for NetEase going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for NetEase that you should be aware of.
This article by Simply Wall St is general in nature. 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.
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