NetEase (SEHK:9999): Valuation Check After China Gaming Revenues Hit Record Highs and Overseas Growth Accelerates

China's video game market just logged record revenue, growing about 8% this year as domestic hits from Tencent and NetEase (SEHK:9999) gained traction overseas, especially on mobile and AI enhanced titles.

See our latest analysis for NetEase.

NetEase's share price has pulled back from recent highs, with a 90 day share price return of negative 8.38%. However, the year to date share price return of 56.04% and three year total shareholder return of 102.88% still point to strong, longer term momentum as investors weigh record industry growth against shifting sentiment around regulation and AI driven game pipelines.

If NetEase's run has you thinking about what else could surprise the market, this might be a good moment to explore high growth tech and AI stocks as potential next candidates.

With earnings growing at a high single digit pace and the stock still trading at a discount to analyst targets, should investors view NetEase as undervalued, or assume the market is already pricing in its next leg of growth?

Most Popular Narrative: 16.8% Undervalued

With NetEase last closing at HK$214.40 versus a narrative fair value near HK$257.83, the valuation hinges on steady growth and resilient margins.

The company is demonstrating margin improvements (e.g., games and related VAS gross margin rising to 70.2%) due to a shift toward a higher proportion of revenue from self-developed games, which enhances profitability and resilience of net margins over time.

Read the complete narrative.

Curious how modest growth assumptions, richer margins, and a higher future earnings multiple combine into that premium value signal? Unpack the full narrative to see the numbers behind it.

Result: Fair Value of $257.83 (UNDERVALUED)

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

However, lingering regulatory uncertainty and heavy reliance on slower growth in China could quickly undermine those optimistic margin and valuation assumptions.

Find out about the key risks to this NetEase narrative.

Build Your Own NetEase Narrative

If this view does not quite match your own, dive into the numbers yourself and craft a fresh perspective in just minutes: Do it your way.

A good starting point is our analysis highlighting 4 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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