Core Viewpoint - NetEase (NTES) has demonstrated strong performance in the gaming and Internet services sector, achieving a 6.6% increase in stock value over the past month, surpassing the industry average of 5.9% and outperforming peers like Red Violet, Criteo, and Globant [1][2]. Group 1: Financial Performance - The strong momentum in online gaming services and significant revenue growth in Q3 2024 contributed to NetEase's outperformance [2]. - In Q3 2024, net revenues from online games constituted approximately 96.8% of the segment's total net revenues, an increase from 96.1% in Q2 and 93.7% year-over-year [3]. - Mobile games accounted for about 70.8% of net revenues from online game operations in Q3 2024, down from 76.4% in Q3 2023 and 77.6% in Q2 2024 [3]. Group 2: Gaming Division Highlights - NetEase's gaming division is thriving, with popular titles experiencing impressive growth; PC games saw net revenues increase by approximately 29% year-over-year and 30% quarter-over-quarter [5]. - Legacy franchises like Fantasy Westward Journey and Westward Journey Online continue to attract players, with a new chapter introduced in Fantasy Westward Journey Mobile [6]. - NARAKA: BLADEPOINT celebrated its third anniversary, enhancing player engagement through new updates [7]. - Justice Mobile is redefining traditional MMOs with innovative features, including AI-driven NPCs and user-generated AI companies [8]. Group 3: Technological Innovations - NetEase is committed to technological advancements, with significant strides in AI-driven subscription services and tools that enhance user engagement [13][15]. - The AI model Ziyue achieved over 4 million users in its debut quarter, setting a new industry standard [11]. - Youdao Literature has launched AI-powered writing enhancement tools, leading to increased user engagement [12]. Group 4: International Expansion and Future Prospects - NetEase is expanding its international gaming footprint, with Justice Mobile set to launch in Hong Kong, Macau, and Taiwan, and Dunk City Dynasty on track for a global release [14]. - The company is intensifying its game pipeline with plans to unveil several highly anticipated titles in the coming months [14].

OpenAI 要研发人形机器人。 媒体援引两位知情人士消息，OpenAI 考虑开发一款人形机器人。在此之前，OpenAI 已经投资 Figure、1X 两家人形机器人公司和研发机器人模型的 Physical Intelligence，并重新组建了四年前解 散的机器人软件团队。 OpenAI 正借助 ChatGPT 带来的势能扩大业务范围，从搜索到浏览器再到研发 AI 芯片等，并与客 户、合作伙伴以及投资的公司竞争。 人造物体离太阳又近了一些。 NASA 宣布，帕克太阳探测器（Parker Solar Probe）正在刷新历史纪录，12 月 24 日以 69 万公里的 时速（不到 10 秒就能从北京到深圳），飞过距离太阳表面 610 万公里的近日点。 帕克太阳探测器于 2018 年发射升空，两个月后就刷新了人造物体距离太阳最近的纪录，并在 2021 年飞越日冕。现在还不能确定这次任务是否成功，因为距离太远，帕克太阳探测器返回的信号最快 也得 12 月 27 日抵达地球。 网易新园区入驻上海青浦。 据界面新闻，继华为之后，网易位于上海青浦的园区也即将启用，届时将有约 2 万名员工迁入办 公。新园区总建筑面积 62 ...

Core Insights - The articles emphasize the importance of maintaining a public track record of successful investment ideas and encourage discussions among readers [1][2] - The author has a director-level position in Accounting/Finance and has been investing for five years, achieving a cumulative return of +20% CAGR with a focus on low-risk investments [1] - The investment strategy involves generating alpha through a limited number of well-researched ideas, highlighting the significance of discipline and patience in investing [1] Company and Industry Summary - The author expresses a beneficial long position in NTES shares, indicating a personal investment interest in the company [3] - The articles clarify that no financial advice is provided, and the views expressed may not reflect those of Seeking Alpha as a whole, emphasizing the independent nature of the analysis [4]

Core Viewpoint - NetEase (NTES) has received an upgrade to a Zacks Rank 1 (Strong Buy), indicating a positive outlook for its stock based on rising earnings estimates [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system emphasizes the importance of changing earnings estimates, which are strongly correlated with near-term stock price movements [3][5]. - Institutional investors often rely on earnings estimates to determine the fair value of stocks, leading to significant price movements based on their buying or selling actions [3]. Business Improvement Indicators - The upgrade in NetEase's rating reflects an improvement in the company's underlying business, suggesting that investors may respond positively by driving the stock price higher [4][10]. - Analysts have raised their earnings estimates for NetEase, with the Zacks Consensus Estimate for the fiscal year ending December 2024 projected at $7.08 per share, representing a year-over-year change of 0.3% [7]. Zacks Rank System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [6]. - Only the top 5% of Zacks-covered stocks receive a 'Strong Buy' rating, indicating superior earnings estimate revisions and potential for market-beating returns [8][9].

Group 1: NetEase (NTES) - NetEase is an Internet technology company in China, focusing on the development of applications, services, and technologies for the Internet, with a Zacks Rank of 1 (Strong Buy) [1] - The Zacks Consensus Estimate for NetEase's current year earnings has increased by 4.1% over the last 60 days [1] - NetEase's shares have gained 16.4% over the last three months, outperforming the S&P 500's gain of 2.5%, and the company has a Momentum Score of A [2] Group 2: Photronics (PLAB) - Photronics is a leading worldwide manufacturer of photomasks, holding a Zacks Rank of 1 [2] - The Zacks Consensus Estimate for Photronics' current year earnings has increased by 4.6% over the last 60 days [2] - Photronics' shares have gained 6.6% over the last three months, also outperforming the S&P 500's gain of 2.5%, and the company has a Momentum Score of A [2] Group 3: SEI Investments (SEIC) - SEI Investments is an asset management company providing wealth management business solutions in the financial services industry, with a Zacks Rank of 1 [3] - The Zacks Consensus Estimate for SEI Investments' current year earnings has increased by 3.8% over the last 60 days [3] - SEI Investments' shares have gained 18.6% over the last three months, significantly outperforming the S&P 500's gain of 2.5%, and the company has a Momentum Score of B [3]

Group 1: ZIM Integrated Shipping Services - ZIM Integrated Shipping Services is a global container liner shipping company providing container shipping and related services in Israel and internationally [1] - The Zacks Consensus Estimate for ZIM's current year earnings has increased by 35.7% over the last 60 days [1] - The company has a dividend yield of 5.8%, which is higher than the industry average of 3.6% [2] Group 2: NetEase - NetEase is an Internet technology company engaged in the development of applications, services, and other technologies for the Internet in China [2] - The Zacks Consensus Estimate for NetEase's current year earnings has increased by nearly 4.1% over the last 60 days [2] - The company has a dividend yield of 1.8%, compared to the industry average of 0.0% [3] Group 3: West Bancorporation - West Bancorporation focuses on providing community-oriented personal and commercial banking services to small and medium-sized businesses, individuals, schools, organizations, and local government [3] - The Zacks Consensus Estimate for West Bancorporation's current year earnings has increased by nearly 7.7% over the last 60 days [3] - The company has a dividend yield of 4.3%, which is higher than the industry average of 2.9% [4]

Investment Rating - The report maintains a "Buy" rating for NetEase-S (9999 HK) with a target price of HKD 180 0 [1][2] Core Views - NetEase's product cycle has bottomed out with key new games such as *Marvel Rivals* and *Yanyun Sixteen Sounds* set to launch in December 2024 and *Infinity* expected in 2025 [1] - The company's game pipeline is robust with a focus on international IPs and innovative gameplay which could drive future growth [1][18] - Despite short-term revenue pressure due to high base effects in Q3 2024 NetEase's毛利率 exceeded expectations at 62 9% [1] Product Line Summary Key New Games - *Marvel Rivals* a 6v6 hero tactical shooter based on the Marvel IP is set to launch on December 6 2024 with strong pre-registration data indicating potential for significant overseas player acquisition and long-term monetization [1][18] - *Yanyun Sixteen Sounds* an open-world martial arts game is expected to launch on PC by the end of December 2024 with mobile optimization ongoing The game has undergone significant tuning to address earlier concerns and could exceed market expectations [1][25] - *Infinity* an innovative open-world二次元 game is set to begin testing in December 2024 with unique art and gameplay mechanics that could expand NetEase's presence in the二次元 genre [1][31] Classic Games - Flagship games like *Fantasy Westward Journey* and *Justice* showed some year-over-year pressure in Q3 2024 but are expected to stabilize quarter-over-quarter *Fantasy Westward Journey*手游 continues to attract younger users with lighter gameplay [1][39] - *Justice*手游 saw a decline in Q3 2024 due to high base effects but its high user stickiness and回流率 are expected to support its lifecycle [1][51] Other Notable Games - *Eggy Party* saw a decline in third-party rankings partly due to the shift to官网付费 but is expected to maintain its lead over competitors like *DreamStar* [1][52][54] Financial Performance - NetEase's Q3 2024 revenue was RMB 26 21 billion down 3 9% YoY below Bloomberg consensus due to high base effects from games like *Justice* [1][61] - Game and related value-added services revenue declined 4 2% YoY to RMB 20 86 billion while毛利率 improved to 62 9% exceeding expectations [1][62] - Adjusted net profit attributable to母公司 was RMB 7 5 billion down 13 3% YoY [1][62] Valuation and Forecast - The report下调s NetEase's adjusted net profit forecasts for 2024-2026 to RMB 31 29 billion RMB 33 47 billion and RMB 35 51 billion respectively reflecting the impact of high base effects in Q3 2024 [1][88] - The SOTP valuation assigns an 18x PE to the online游戏业务 for 2025 with target price下调 to HKD 180 0 [1][88]

Core Insights - True value in investments is derived from growth rather than short-term gains, emphasizing a long-term perspective on evaluation [1] - Great businesses provide significant societal value and exhibit durability, deserving of substantial growth [1] - Key characteristics sought in investments include selection, convenience, value, and durability, with a preference for non-cyclical businesses [1] Business Characteristics - Businesses that can consistently outperform competitors through superior products and services are favored [1] - The ability to create multiple revenue streams and maintain complex operations is seen as advantageous [1] - A strong test of a business's resilience is its ability to recover from adversity, both macro and micro [1] Value Drivers - Uniqueness is identified as the primary driver of value [1] - Low costs associated with maintaining existing business operations provide leverage for reinvestment and growth [1] - Trust and network effects are important indicators of a business's durability [1] Management Importance - Effective management is crucial, with a preference for executives whose interests align with the business and who maintain a strong focus [1] - Companies led by seasoned CEOs, founders, or family businesses are particularly valued [1] - Good management fosters a culture that empowers employees and attracts talent, with continuous learning being a key trait [1] Investment Strategy - The success of companies like Amazon illustrates the benefits of a customer-centric approach, leading to extraordinary returns [1] - Favorable investment conditions arise when negative news is already priced in, revealing true value [1] - A strategy of buying back shares is recommended for businesses with durable prospects [1]

Investment Rating - The report maintains a "Buy" rating for the company, indicating a strong expectation of performance exceeding the market by over 20% [7][10]. Core Insights - The company's performance and valuation are at a low point, with expectations for a turning point approaching. The Q3 pipeline was weak, but Q4 is anticipated to show improvement with new game releases contributing positively [7]. - The company is expected to see revenue growth in 2025, driven by new game launches and a recovering gaming market. The adjusted revenue forecasts for 2024-2026 are 105.6 billion, 116.7 billion, and 122.6 billion respectively [7][9]. - Shareholder returns are expected to be attractive, with significant cash dividends and share buybacks accelerating. The total shareholder return for the year is projected to reach 2.61 billion USD, resulting in a return rate of 4.7% [8]. Summary by Sections Market Data - Closing price is 133.60 HKD, with a market capitalization of 428.96 billion HKD. The stock has a 52-week high of 180.50 HKD and a low of 116.00 HKD [3]. Financial Performance - For Q3 2024, the company reported revenue of 26.21 billion, a year-over-year decrease of 4%. The adjusted net profit was 7.50 billion, down 13% year-over-year [10]. - The company’s revenue and net profit forecasts for 2024-2026 are adjusted to reflect a more conservative outlook, with net profits expected to be 32.08 billion, 35.56 billion, and 37.91 billion respectively [9][10]. Game Segment Performance - The online gaming segment saw a slight decline, while the PC gaming segment experienced significant growth, with a 29% year-over-year increase in Q3 [12]. - The company is launching several new games, including "Fragpunk" and "Marvel: Secret Wars," which are expected to drive growth in 2025 [7]. Shareholder Returns - The company has accelerated its share buyback program, with Q3 buybacks totaling 500 million USD, contributing to a total of 9.6 billion USD in buybacks for the first three quarters of 2024 [8].

Investment Rating - Buy rating with a target price of $108.00 USD / HK$168.05, implying a 26.05% / 24.39% upside potential for the US and HK markets respectively [2] Core Views - Blizzard games' return drives PC gaming revenue growth, with new product cycle expected in 2025 [2] - Q3 2024 revenue of RMB 26.21 billion, down 3.9% YoY, below Bloomberg consensus of RMB 26.59 billion [2] - GAAP net profit of RMB 6.54 billion, down 16.6% YoY, while Non-GAAP net profit of RMB 7.50 billion, down 13.3% YoY [2] - Mobile gaming revenue under pressure due to lack of new titles, while PC gaming revenue grows 29.0% YoY [2] - Youdao achieves record operating profit in Q3, driven by smart hardware and advertising business growth [2] - Cloud Music enters Hong Kong Stock Connect, with Q3 revenue of RMB 2.0 billion, up 1.3% YoY [2] Financial Performance Revenue - Q3 2024 total revenue: RMB 26.21 billion, down 3.9% YoY [2] - Gaming and value-added services revenue: RMB 20.86 billion, down 4.2% YoY [2] - Mobile gaming revenue: RMB 14.3 billion, down 9.7% YoY [2] - PC gaming revenue: RMB 4.55 billion, up 29.0% YoY [2] - Youdao revenue: RMB 1.57 billion, up 2.2% YoY [2] - Cloud Music revenue: RMB 2.0 billion, up 1.3% YoY [2] Profitability - Operating profit margin: 27.3%, down 40bps YoY [2] - GAAP net profit: RMB 6.54 billion, down 16.6% YoY [2] - Non-GAAP net profit: RMB 7.50 billion, down 13.3% YoY [2] - Youdao operating profit: RMB 110 million, up 186% YoY [2] Future Projections - 2024-2026 revenue CAGR: 10.5% [2] - 2024-2026 Non-GAAP net profit CAGR: 8.5% [2] - 2025 PC gaming revenue expected to decline 12% to RMB 21.6 billion [2] - 2025 mobile gaming revenue expected to grow 5.4% to RMB 60.0 billion [2] Business Segments Gaming - Blizzard games' return drives PC gaming growth, with World of Warcraft and Hearthstone contributing to revenue increase [2] - New titles expected in 2025, including Marvel Rivals and Yan Yun Shi Liu Sheng [2] - Pipeline includes Code: Infinity, Marvel Rampage, and Destiny: Rise [2] Youdao - Smart hardware revenue grows 25.2% YoY to RMB 320 million, driven by X7Pro dictionary pen sales [2] - Online marketing revenue grows 45.6% YoY to RMB 490 million, supported by AI optimization [2] Cloud Music - DAU/MAU ratio remains above 30%, with 24.4% paying user ratio [2] - ARPU reaches RMB 6.2 per month, with 730,000 independent musicians on the platform [2] Valuation - Target price of $108.00 USD / HK$168.05, based on 14.9x 2025 PE [2] - Gaming business valued at 1.2x PEG, with 12x PE for Non-GAAP net profit [2] - Youdao and Cloud Music valued based on NetEase's shareholding, with 5% discount applied to group valuation [2]