Bank of China International has released a report discussing the upcoming third-quarter financial results of NetEase (NTES, Financial), expected to be revealed in mid to late November. Analysts predict a rather disappointing performance with total revenue and core gaming revenue expected to decline by 5% year-over-year. This is primarily due to an anticipated 7% decrease in mobile gaming revenue, falling 4% below market expectations.
The report projects that the company's gross margin and adjusted net profit margin will align with market expectations at 62.6% and 30.3%, respectively. To tackle the challenging macroeconomic environment and intense market competition, NetEase has been accelerating strategic adjustments in game development, operations, and investment execution both domestically and internationally in recent months. Despite these efforts, the company remains committed to developing and operating international IP content.
While Bank of China International maintains a "buy" rating for NetEase, it has adjusted the target price to HKD 151, citing a relatively weak outlook for mobile games in the second half of the year.
