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<Research>JPM Downgrades NTES-S/ BILIBILI-W to Neutral
Recommend 21 Positive 29 Negative 17 |
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China's digital entertainment stocks have performed strongly YTD, driven not only by improved fundamentals but also by investment themes such as AI, according to JPMorgan's research report. However, the broker believed that the stock price outlook for NTES-S (09999.HK)(NTES.US) and BILIBILI-W (09626.HK)(BILI.US) will be less attractive in the next 6 months, and downgraded the above 2 stocks from Overweight to Neutral, while raising its target prices. Regarding NTES-S, JPMorgan believed that there is limited upside in earnings as marketing expenses will increase over the next 1-2 years due to the promotion of new and existing games, with a lack of blockbuster game launches in 2H25 to drive game revenue growth. Therefore, the broker lifted its target price for NTES-S' H-shares/ US stock from $210/ US$135 to $220/ US$140. Regarding BILIBILI-W, although JPMorgan remained optimistic about its advertising revenue growth rate exceeding industry levels, 'Sanmou' will face high base pressure in 2H25, causing total revenue growth to slow from 24%/ 20% in 1Q25/ 2Q25 to 5% in 2H25, with BABA-W (09988.HK)'s 'Three Kingdoms: Tactics' continuing to have strong competitiveness in China's strategy game market. Therefore, the broker elevated its target prices for BILIBILI-W's H-shares/ US stock from $165/ US$21 to $185/ US$24. The broker suggested investors to focus on stocks with reasonable valuations and double-digit CAGR in earnings, with KUAISHOU-W (01024.HK) being its top pick in the digital entertainment industry. BOSS ZHIPIN-W (02076.HK) and BEKE-W (02423.HK) were favored in the vertical internet sector. AASTOCKS Financial News Website: www.aastocks.com |
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