Key Takeaways
HSBC Global Research trimmed its price target on NetEase Inc.’s Hong Kong-listed shares to $265 from $289, citing reduced projections for several key games and a lack of near-term catalysts.
The downgrade reflects "reduced projections for Sword of Justice, Where Winds Meet and other long-tail mobile games," the bank said in a research report. HSBC maintained its Buy rating on the stock.
The bank's adjustment comes as NetEase's US-listed stock has fallen 18 percent year-to-date. HSBC also lowered its non-GAAP net profit forecasts for the 2026-2028 period by 6 to 7 percent.
The report suggests a challenging period ahead for the Chinese gaming giant, with HSBC predicting weak first-half 2026 performance due to a high base effect and the absence of major new game launches.
While the near-term outlook appears muted, HSBC anticipates a rebound in growth for NetEase during the second half of 2026 and into 2027. This recovery is expected to be driven by the launch of two new titles, "Sea of Remnants" and "Ananta," which are positioned as the company's next significant growth catalysts.
The current valuation reflects a broader sector de-rating and concerns over the company's immediate game pipeline. The 18 percent year-to-date decline in NetEase's US shares highlights investor concerns.
The price target reduction suggests that while HSBC remains positive on NetEase's long-term potential, its earnings trajectory over the next two years may be lower than previously expected. Investors will be closely watching for updates on the development and launch timelines for "Sea of Remnants" and "Ananta" as indicators of future growth.
This article is for informational purposes only and does not constitute investment advice.
