Daily Stock Pick: May 27th, 2021

Meme stocks are back in full force with GME and AMC ascending 16% and 19% respectively in yesterday’s session.  Both stocks are up 37% or more in the week to date, rising to closing levels not seen in months.  This week’s rally has sparked a flame under Reddit forums, Twitter feeds and Discord chat rooms similarly to previous rallies among meme stocks.  No singular or clear catalyst seems to be driving this week’s rally, though individual investors seem to be piling in.

Today we’re highlighting a stock that we issued a buy alert for earlier this month.  In less than two weeks the stock has risen more than 11% and this could be just the beginning.  We are holding strong with our Buy recommendation, along with 28 of the 32 analysts covering the stock, as this stock seems primed for continued strength.  Read on to find out who we’re talking about.  

 NetEase Inc (NTES) develops and operates mobile and PC games, communities, and eCommerce platforms.  Its titles include some of the most popular games in China such as the Westward Journey series, Ghost, and partnering with Activision Blizzard (ATVI) to deliver Chinese-versions of Blizzard games to its users. 

NTES became a public company in 2000.  Since then, the video game industry has gone from a $20 billion industry to be worth nearly $200 billion.  NTES has ridden this wave to become one of the most valuable video game companies in the world.  It’s looking to maintain its standing as one of the leading gaming companies in China with new products including a VR-based, open-world, role-playing game that is highly anticipated by the gaming community.

Over the last ten years, NTES’s revenue has gone from $780 million to $11.2 billion.  Next year, earnings are expected to grow by 60% and revenues by 27%.  Due to this, NTES has a reasonable forward PE of 38. 

NTES’s leading position in the video game market is expected to grow at a double-digit CAGR over the next decade.  NTES also has shown the ability to develop and launch new games that are well-received by the public and partner with foreign developers to bring popular games to the Chinese market. 

The current consensus among 32 polled analysts is to buy NTES.  There are 28 Buy ratings, 3 Hold ratings and only 1 Sell ratings for the stock. On Friday, May 14th we issued a trade alert to buy NTES stock.  Since then, the share price has gained nearly 11%.  In our opinion, NTES continues to stand out among its peers and we reiterate our Buy recommendation.

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