Chinese video game publisher and internet services firm NetEase on Thursday beat analyst estimates for earnings in the third quarter on in-line sales. NTES stock fell after the report.
The Hangzhou, China-based company earned an adjusted $1.84 per U.S. share on sales of $3.74 billion in the September quarter. Analysts polled by FactSet had expected earnings of $1.49 a share on sales of $3.74 billion. On a year-over-year basis, NetEase earnings rose 16% while sales climbed 9%.
Video games accounted for 80% of NetEase revenue in the third quarter. In addition to online and mobile games, NetEase offers a search engine, streaming music and other internet services.
"Our robust and increasingly diversified games portfolio led our strong results in the third quarter," Chief Executive William Ding said in a news release.
He added, "Our flagship games continue to win the hearts of players with fan favorites like the 'Fantasy Westward Journey' series. Our newest innovative, first-rate games in various genres, including 'Racing Master,' 'Justice' mobile game and 'Dunk City Dynasty,' also quickly gained widespread acclaim."
NetEase Shares Fall After Report
On the stock market today, NTES stock fell 2.4% to close at 112.35.
On Nov. 3, NTES stock broke out of a flat base at a buy point of 110.82, according to IBD MarketSmith charts. As of Thursday's close, NetEase was still in the 5% buy zone, based on IBD trading guidelines. However, if the breakout fails, the stop-loss sell zone starts at 103.06.
NetEase also announced a dividend of 49.5 cents per U.S. share for the third quarter for shareholders of record as of Dec. 1. For the second quarter, NetEase paid a dividend of 52.5 cents per U.S. share.
The company also announced a new share repurchase program of up to $5 billion of the company's ordinary shares and American depositary shares in open market transactions.
NTES Stock Ranks Second In Group
Several video game stocks have jumped following earnings reports lately. They include Electronic Arts, Gravity, Roblox and Take-Two Interactive Software.
On Monday, South Korean video game publisher Gravity reported third-quarter earnings of $3.09 per U.S. share, up 91% from the year-earlier period. Meanwhile, Gravity's sales rose 72% year over year to $130.7 million.
Gravity makes online and mobile games for distribution in South Korea, Taiwan, Thailand, and the U.S. Its games include the "Ragnarok" franchise.
Gravity's thinly traded U.S. shares rose 4.9% to 65 on Monday after the report. GRVY stock ended the regular session Thursday at 70.51.
Gravity ranks first out of 20 stocks in IBD's Computer Software-Gaming industry group, according to IBD Stock Checkup. GRVY stock has an IBD Composite Rating of 97 out of 99. NTES stock is second in the group with a Composite Rating of 95.
Take-Two Stock Breaks Out
Last week, Take-Two Interactive Software beat expectations for its fiscal second quarter ended Sept. 30. Take-Two's earnings guidance for the current quarter and full fiscal year was above Wall Street's targets but its sales outlook was mixed.
On Tuesday, TTWO stock broke out of a 17-week consolidation pattern at a buy point of 153.84, MarketSmith charts show. TTWO stock ended the regular session Thursday at 154.85.
Also last week, video game platform Roblox beat expectations with its third-quarter report. It posted a smaller-than-expected loss and topped views for bookings. Its third-quarter bookings rose 20% to $839.5 million. But Roblox remains unprofitable, with a Q3 loss of 45 cents a share.
On Nov. 1, Electronics Arts delivered better-than-expected sales and earnings for the September quarter. It earned an adjusted $1.46 a share, up 17% year over year, on net bookings of $1.82 billion, up 4%. Analysts had expected no growth from EA. It also provided reassuring guidance.
EA cited a strong performance by its sports titles, including "EA Sports FC," a soccer game that replaced its FIFA-branded series.
NTES Stock Is A Tech Leader
The video game industry stock group has been a middling performer of late. IBD's Computer Software-Gaming group currently ranks No. 80 out of 197 industry groups that IBD tracks.
However, NTES stock is on the IBD Tech Leaders list, along with Electronic Arts.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
