NetEase Inc (HKG:09999) is a rare tech stock this year. The stock has a year-to-date return of 4.48%, despite the bruises that other tech giants have suffered. We believe NetEase offers a chance for investors looking to preserve value and make returns.
NetEase is a Chinese internet tech company. It offers online services centered around commerce, content, and communications. The specific areas of operation include online PC, advertising, mobile games, and email services. These are key segments that had a lot of growth during the pandemic and continue to grow to date.
Fundamentally, NetEase remains robust. In its first-quarter results, EPS of RMB7.72 came better than estimates of RMB7.03. A revenue of RMB23.56 billion was also higher than the RMB23.12 billion estimates. Besides the robust results, NetEase is well rated by Wall Street. The stock has a consensus buy rating, with a price target of $128. The target represents an upside potential of more than 22%.
Besides the fundamentals, we believe being a Chinese stock offers another advantage. Investors are already pulling strings on Chinese stocks as their American counterparts stay subdued. Recent reports have indicated that China is relaxing its grip on its tech giants. A relaxation of the Covid-19 restrictions also adds more impetus to Chinese stocks.
NetEase stock maintains above 200-day MA.
Source: TradingView
Technically, NetEase is bullish at $105. The stock has always maintained above the 200-MA. Currently, the 50-day MA is joining support, suggesting a higher price move. We believe the stock could rise to reclaim the previous high above $130. However, we recommend a buy on a retracement towards the 200-day MA for a better risk-reward ratio.
Summary
NetEase will continue rising to reclaim the previous high of above $130. We recommend a buy on a retracement towards the 200-day MA.
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