NetEase got beat up amid concerns over proposed guidelines in China on gaming benefits. But Morgan Stanley doesn’t see that as a reason to flee. U.S.-listed shares of the Chinese internet stock tumbled more than 15% Friday. The stock was among those that nosedived after China surprised markets with draft guidelines focused on curbing incentives that can encourage users to gamble and spend. Even after Friday’s slump, shares are still up just over 22% on the year, but in December alone, NetEase is off 22%. Despite the recent underperformance, Morgan Stanley analyst Alex Poon still likes the stock, rating it overweight and saying it’s a top 2024 pick. His $150 price target implies shares can rally 82.9% from Friday’s open and is above the Street consensus of $136, according to FactSet. Poon said the potential Chinese guidelines will have minimal revenue effect on NetEase. But he told clients Friday that the sell-off has made its short-term valuation “much more compelling.” He also said the share price should rise over the next 60 days. Additionally, the analyst thinks NetEase’s game pipeline is strong in both the near term and for all of 2024. Poon is in the majority of Wall Street analysts with a buy-equivalent rating on the stock, according to LSEG, formerly known as Refinitiv. — CNBC’s Michael Bloom contributed to this report.
