Stock Analysis

Following recent decline, NetEase, Inc.'s (NASDAQ:NTES) top shareholder CEO Lei Ding sees holdings value drop by 6.6%

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NasdaqGS:NTES
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If you want to know who really controls NetEase, Inc. (NASDAQ:NTES), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are individual insiders with 47% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to US$49b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of NetEase.

However if you'd rather see where the opportunities and risks are within NTES' industry, you can check out our analysis on the US Entertainment industry.

ownership-breakdown
NasdaqGS:NTES Ownership Breakdown September 22nd 2022

What Does The Institutional Ownership Tell Us About NetEase?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

NetEase already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of NetEase, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:NTES Earnings and Revenue Growth September 22nd 2022

NetEase is not owned by hedge funds. The company's CEO Lei Ding is the largest shareholder with 47% of shares outstanding. With 2.9% and 2.5% of the shares outstanding respectively, BlackRock, Inc. and Invesco Ltd. are the second and third largest shareholders.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of NetEase

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

It seems insiders own a significant proportion of NetEase, Inc.. It has a market capitalization of just US$49b, and insiders have US$23b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NetEase. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand NetEase better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

What are the risks and opportunities for NetEase?

NetEase, Inc. provides online services focusing on diverse content, community, communication, and commerce in the Peoples’ Republic of China and internationally.

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Rewards

  • Trading at 49.8% below our estimate of its fair value

  • Earnings are forecast to grow 8.06% per year

  • Earnings grew by 76.7% over the past year

Risks

No risks detected for NTES from our risks checks.

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Share Price

Market Cap

1Y Return

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About NasdaqGS:NTES

NetEase

NetEase, Inc. provides online services focusing on diverse content, community, communication, and commerce in the Peoples’ Republic of China and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation6
Future Growth2
Past Performance5
Financial Health5
Dividends2

Read more about these checks in the individual report sections or in our analysis model.

Very undervalued with solid track record.