However, the market has expressed its joy at this news with actions. On the day of the news (May 5), the stock price of the Hong Kong Stock Exchange temporarily rose by 3%. Netease shares rose further. As of May 19, Netease's share price rose to $395.69, a record high.
Twenty years later, Netease returned to know the market better and its value was recalculated.
Cheap and high-quality representative of China Stock Exchange
Being undervalued may be a common phenomenon in the US stock market. Compared with similar companies in Hong Kong stock market and A-share market, the share price return rate of listed companies in US stock market is relatively low. Netease is a typical example.
At present, the return rate of Netease's share price is about 16 times. The market's recognition of Netease's value basically comes from games, which can be simply compared with game companies of US stocks and A shares. At present, the average share price returns of US stocks and A-shares are all above 20 times. Compared with this, Netease's share price returns are obviously in a low position. There are also 37 A-share listed companies that call themselves Little Netease, with a return rate of more than 32 times.
Many overseas institutions also agree with this, describing the low quality of the network. Foreign media SeekingAlpha believes that Netease's game revenue and free cash flow have been in a growth mode in the past 15. At the same time, its powerful internal R&D capability and R&D investment have brought Netease a competitive advantage.
The development of massively multiplayer online role-playing games (MMORPG) is the advantage of Netease. A successful MMORPG game has three important characteristics: the life cycle of the game is long, the income obtained through social relations is high, and the operating funds prepaid by players for game time and tools are negative. These three important features are particularly obvious in Netease games.
In MMORPG-type games, Netease occupies 40% of the market share, and has always maintained negative operating costs. Netease's Journey to the West, Dream Journey to the West and World of Warcraft, which represents Blizzard, belong to this type. Moreover, these flagship products have shown strong vitality for more than five years, and now they are continuously delivering cash flow for Netease.
At the same time, Netease still maintains a strong self-research ability. In the new game, the works such as Fantasy Westward Journey Web Edition, Tiandao Trust and Ghost Story of Money Girl have high expectations among users, which will certainly have great attraction.