Analysis: The9 Ltd. (NYSE:NCTY):
Introduction: The9 Limited is a leading online game operator and developer in
Fundamental: The Company reported strong top and bottom lines increase. Revenue increased substantially due to the very successful game WoW, which was launched in June in
Gross profits went up a lot, whereas the gross margin declined 50%, which was primarily due to the 1-month amortization in the acquisition activity and the transfer of WoW's development expenses. But these two factors both resulted in one-off effect, the gross profit margin is expected to increase in pace of gross profit. Operating expenses decreased as the decreased development cost.
The Company has no long-term debt at all, which makes its liquidity a little riskier than other companies in the industry. All the profitability ratios (TTM) are well below the industry averages, although the MRQ ratios are above the averages
Technical: Price crossed below 50DMA last week. Similarly, relative strength index went into the negative territory, and MACD (12,26) is expected to head south and cross below the MACD EMA (9). Medium-term: BUY, price target is $15-$20 in February 2005.
2005 Q3 Highlights:
· Net revenues for the third quarter increased 2,096% year-over-year and 232% quarter-over-quarter to $184.8 million.
· Gross margin for the third quarter was 50.1%, down from 54.1% in the previous quarter.
· Operating expenses totaled $42.2 million, down 24.9% from the previous quarter.
· Net income totaled RMB37.7 million, compared to a net loss of RMB23.0 million in the previous quarter.
| Looking forward: WoW is expected to enter into its growth stage in |
WoW is one of the most popular MMORPGs in
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