A Look at NetEase (SEHK:9999) Valuation Following Strong Q3 Sales and Earnings Growth

NetEase (SEHK:9999) has released third quarter results showing significant gains in sales and net income compared to last year. Improved earnings per share also highlight stronger operations, attracting attention from market watchers and investors alike.

See our latest analysis for NetEase.

NetEase’s upbeat third quarter results have fueled strong momentum in the stock, with a year-to-date share price return of almost 62%. Recent news, including a fresh dividend, ongoing music platform innovations, and continued buyback announcements, has underscored confidence in both the company’s strategy and prospects. Over the longer term, the total shareholder return stands out, reaching nearly 65% over the past year and more than doubling over three years. This confirms not just short-term optimism but a broader uptrend in value and market sentiment.

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With NetEase’s latest results exceeding expectations, the pressing question is whether the current share price accurately reflects the business’s growth and future prospects. Investors may also be considering if there is still an attractive entry point.

Most Popular Narrative: 13.1% Undervalued

NetEase’s current share price sits noticeably below the projected fair value in the most widely followed narrative. This suggests strong market optimism for further upside. This valuation assumes that future improvements in profit margins and sustained global expansion are not fully reflected in the current price.

NetEase is accelerating global expansion with self-developed and licensed games that have performed strongly in overseas markets (e.g., Marvel Mystic Mayhem, FragPunk, Once Human, Eggy Party). This is increasing the company's addressable market and diversifying revenue streams beyond China, supporting higher long-term revenue growth and earnings stability.

Read the complete narrative.

Want to see what’s fueling this bullish outlook? The narrative leans on bold projections for overseas success and stronger profitability from new game launches. What growth milestones and margin shifts underwrite this price target? Uncover the financial logic behind the optimism by reading the full breakdown now.

Result: Fair Value of $255.93 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain, including NetEase's heavy reliance on China as well as the potential for rising costs to squeeze margins if global expansion stumbles.

Find out about the key risks to this NetEase narrative.

Another View: Multiples Say Caution

While the fair value estimate suggests NetEase is undervalued, looking at its price-to-earnings ratio tells a different story. The company trades at 17.6 times earnings, which is higher than both the Hong Kong Entertainment industry average of 14.9 times and its peer average of 15.6 times. The fair ratio sits at 22.3 times, hinting there could be room for upward movement if sentiment shifts. Does this premium signal real strength, or is it hiding risks?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own NetEase Narrative

If you want a different take or like to dig into the data yourself, consider shaping your own NetEase story in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding NetEase.

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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.

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