Netease.com Inc. (NTES) Reaches New High

Chinese Internet portal Netease.com reached a new 52 week high yesterday which also happened to be a 5 year high for the company.

Earnings Beat

            The company recently beat June quarter estimates by 25%, earning 49 cents when analysts were expecting only 39 cents. This came after a March 2008 miss by 3.2%. The earnings have been hit and miss on the expectations side, missing twice and beating soundly twice in the last four quarters.

Fundamentals

            The revenue growth of the company has been one consistent factor over the past four quarters and is expected to continue for the remainder of the year. Their September report should show 46% revenue growth and analysts are expecting 35.8% revenue growth for the quarter ending in December compared to the prior year.

            The trailing price to earnings ratio for the stock is low for a company growing at 40% a year, only 17.53. But taken into account the Chinese stock market correction and the uneven earnings growth, some caution by investors is appropriate.

The Trade

            On a pull back in the stock and a rally in the Chinese market, you could get long NTES for a period of time. But I would not hold the stock through an earnings announcement as they could miss again and you would need to re-evaluate the position.