NTES – Market expectations are for collapsing Uniform ROA, but management’s confidence about revenue growth and their e-commerce strategy implies this may be unwarranted
October 3, 2017
- NetEase, Inc. (NTES:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings with a 13.6x Uniform P/E, implying bearish expectations for the firm. However, given management’s confidence about revenue growth and their e-commerce strategy, this may be unwarranted
- Specifically, management is confident about the sustainability of net revenue growth, and that they will not undermine the profitability of their e-commerce business by doing subsidies in their other activities. As such, expectations for material declines in Uniform ROA appear too bearish, and multiple expansion and equity upside may be warranted