Barclays Keeps NetEase at Equal-Weight, Boosts Price Target to $120.00

Barclays maintains Equal-Weight rating for NetEase (NTES) while raising the price target from $118.00 to $120.00 USD, a 1.69% increase. The company has transformed into a leading force in the second-largest online game company in China, with a portfolio of captivating franchises and collaborations with major IPs. The average target price for NTES is $148.46, with a high estimate of $174.94 and a low estimate of $110.96.

Barclays analyst Jiong Shao has raised the price target for NetEase (NTES) to $120, up from $118, while keeping the stock at an Equal Weight rating. This move follows the company's Q2 2023 earnings report, which came in broadly in line with expectations [1].

NetEase's Q1 2023 earnings per share (EPS) of $2.09 missed estimates by $0.01, and revenue of $3.9 billion fell short of expectations by $80 million. Despite the earnings miss, analysts remain optimistic, projecting a one-year price target of $145.36, indicating a potential upside of 7.75%. The average brokerage recommendation is 1.8, categorizing the stock as "Outperform" [2].

The gaming segment continues to be a strong performer, contributing significantly to the company's revenue. Titles like FragPunk and Fantasy Westward Journey Online have driven growth. However, non-gaming segments, including Youdao's educational services and NetEase Cloud Music, faced challenges and need to stabilize and contribute more effectively to the company's overall performance [2].

Analysts have highlighted NetEase's strategic diversification and long-term growth potential. While the earnings miss in Q1 2023 was disappointing, the overall market sentiment remains positive due to the company's strong gaming portfolio and potential for future growth [2].

Investors are advised to closely monitor NetEase's non-gaming segments and the execution of its strategic initiatives. The company's gaming dominance and strong cash position provide a solid foundation for long-term growth. However, the market's overreaction to short-term volatility may have created an attractive entry point for those willing to bet on NetEase's innovation pipeline [2].

NetEase's Q2 2025 earnings report underscores the company's dual narrative: a resurgent gaming segment and persistent challenges in non-core businesses. The gaming division delivered a 13.7% year-over-year revenue increase, driven by new titles and global expansion, while non-core segments like music and e-commerce declined [3].

The gaming segment's resilience is underpinned by NetEase's R&D prowess and strategic partnerships. Titles like World of Warcraft and Overwatch continue to dominate China's competitive gaming market, while cross-platform monetization diversifies revenue streams. Analysts project gaming revenue to grow 15–16% in Q2, with PC gaming surging 58% year-on-year [3].

Non-core segments, however, remain a liability. NetEase Cloud Music's social entertainment revenue fell 3.5% year-on-year, and the Yanxuan e-commerce platform saw a 17.8% revenue decline amid intensified retail competition. These declines highlight NetEase's vulnerability to sector-specific pressures [3].

NetEase's financial discipline and shareholder-friendly policies offer a counterbalance to these challenges. The company repurchased US$2.0 billion worth of ADSs in Q2 and maintained a quarterly dividend of US$0.57 per ADS. These actions signal confidence in the business's long-term prospects and reward investors during periods of uncertainty [3].

The average target price for NTES is $148.46, with a high estimate of $174.94 and a low estimate of $110.96. Barclays' price target increase reflects the company's strong gaming performance and potential for future growth, despite the challenges in non-core segments [1].

References:
[1] https://www.tipranks.com/news/the-fly/netease-price-target-raised-to-120-from-118-at-barclays-thefly
[2] https://www.ainvest.com/news/netease-earnings-revenue-falls-short-expectations-2508/
[3] https://www.ainvest.com/news/netease-q2-earnings-critical-inflection-point-gaming-growth-strategic-resilience-2508/