Chinese online game stocks have been on fire in 2009. The largest Chinese online game developer and operator by revenue, Shanda Interactive (NASDAQ:SNDA), is trading at all time highs above $60, just about twice as high as on January 1st. NetEase (NASDAQ:NTES), the most profitable China online game company, is trailing Shanda closely with a 74.1% gain in 2009 so far. The stock is also at all time highs, raising questions if a China online game bubble is building or what?
According to the following chart, Shanda (NASDAQ:SNDA) is the largest online game operator by revenue in China followed closely by NetEase (NTES). The( (NCTY) and Giant Interactive (GA) are in a distant third and fourth position.
Online game revenue in China in 2008
But when it comes to profitability, NetEase (NASDAQ:NTES) tops the lists followed by Shanda (NASDAQ:SNDA) and surprisingly, Giant (NASDAQ:GA). The9 Inc (NASDAQ:NCTY) is a distant fourth.
Online game profit in China 2008
Considering that Giant Interactive is operating a home grown game portfolio, its profitability makes sense. This is in sharp contrast to The9 Inc which was licencing the WoW paying hefty licence fees to developer WebZen. Shanda and NetEase score higher in both revenue and profit categories thanks to their balanced online game pipeline and strong in house game development capabilities.
What really drives stock prices is revenue and earnings growth! Investors like to see a company with robust earnings growth, something that just a few competitors display at this moment. The following three charts display revenue and earnings growth of Shanda, NetEase and Giant.
Shanda Interactive (NASDAQ:SNDA) revenue and earnings growth
Netease (NASDAQ:NTES) revenue and earnings growth
Giant Interactive (NYSE:GA) revenue and earnings growth
Shanda has made a strong comeback and is delivering robust earnings. NetEase is more sensitive to seasonal fluctuations but is just as strong as Shanda. Giant suffered a big blow in 2008 Q3 and has not fully recovered yet. Given that NetEase and Shanda boosts strong game pipelines, these two are expected to outperform smaller rivals.
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