Rating Quick Look | Kuaishou, Netflix target prices raised! Tencent is optimistic, while NetEase faces price cuts

UBS: Tencent Holdings Rated "Buy" with a Target Price of HKD 480

The bank believes that the management has clearly outlined the group's future growth drivers, including the recent successful launch of the mobile game "Dungeon & Fighter" and the recovery of Supercell's games, as well as mid-term drivers such as live e-commerce, artificial intelligence, and investments. The report states that the firm's firm commitment to share repurchases, emphasis on shareholder returns, and internal rate of return (IRR) will all support valuation.

UBS points out that since its launch on May 21, "Dungeon & Fighter" has ranked first in the Chinese gaming market. Tencent's management is pleasantly surprised by the daily active users (DAU), engagement, and retention rates of the game, believing that this will support the game's longevity. Other upcoming games such as "Squad Busters" and "One Piece: The Will of D" will further accelerate business growth.

The management has noted that the regulatory environment in the mainland gaming industry is normalizing, and Tencent's game portfolio will not support, endorse, or generate cash revenue through user-to-user item transactions.

Citing the management, the report states that Tencent has strong free cash flow, investment portfolio, and net cash to continue funding its share repurchases. Despite the current low interest rates, the management believes that the actual cost of convertible bonds leads to equity dilution, hence there are no issuance plans. They also believe that repurchasing own shares and external investments will generate higher IRR.

Nomura: Adjusts Netease H-Share Target Price Slightly Down to HKD 210, Maintains "Buy" Rating

The report notes that Netease's first-quarter revenue grew by 7% year-on-year, in line with market expectations. The company's earnings per share forecast for the current and next year remains largely unchanged, but the target valuation multiple has been slightly reduced.

Nomura mentions that Netease has added many new popular games over the years, making its game portfolio very diversified and stable. They believe that no single game will cause significant fluctuations in the entire gaming business.

Nomura: Raises Kuaishou Target Price from HKD 58.5 to HKD 63

The report states that the company's first-quarter profit was RMB 4.4 billion, higher than the market's expected RMB 3.2 billion, mainly due to higher profit margins. Driven by operating leverage, the non-GAAP operating profit margin improved by 12 percentage points year-on-year to 12.7%. First-quarter revenue increased by 17% year-on-year, roughly in line with expectations.

The bank points out that Kuaishou's second-quarter revenue guidance is expected to grow by 9.5% to 10% year-on-year. The company has raised its full-year profit guidance to over RMB 17 billion, higher than the original RMB 16 billion, but maintains the full-year revenue growth guidance of 12%.

Morgan Stanley: BYD Rated "In Line with the Market" with a Target Price of HKD 225

The report states that BYD has announced the launch of the fifth-generation DM hybrid technology, with the Dolphin 06DM-i and Qin LDM-i being the first to adopt this hybrid technology. Each car is priced at less than RMB 100,000, showing the company's ambition to increase its market share in the joint venture car market this year. The introduction of related products should increase wholesale volume, and the bank will monitor whether this will trigger a new round of price competition.

The bank believes that the expected launch of new car models indicates that the company's sales performance will be strong

Evercore: Reiterated Netflix's "Outperform" rating, with target price raised from $650 to $700

According to Evercore ISI's latest survey, satisfaction among Netflix's US users has increased as live events and gaming provide new revenue opportunities.

The report stated: "No, the $700 target price we are giving does not mean that Netflix's current stock price will rise significantly. That's why Netflix is a moderate buying opportunity for us. However, we stand by the conclusion reached in our recent preliminary meetings with management, and our research and analysis fully support this conclusion: Netflix is in the most favorable position financially, fundamentally, and competitively that we have ever seen."