STOCKS | Goldman Sachs Raises NetEase Target Price Amid Strong Q1 Performance

Goldman Sachs has raised its target price for NetEase-S (09999.HK) on the Hong Kong stock market by 3.8%, increasing it from HKD 250 to HKD 260. The target price for its U.S. shares has also been raised to USD 166, with a reiterated 'buy' rating. According to Jin10, the bank noted that NetEase's first-quarter performance in 2026 was strong, although the company's stock price remains weak. Goldman Sachs believes the stock's adjustment is excessive, especially after a 6% increase in earnings per share following the earnings announcement. A highlight of the company's quarterly performance was a record-high profit margin, with a 500 basis point increase in gross margin quarter-on-quarter, primarily due to changes in payment channels. Despite AI being in its early stages, it continues to penetrate the company's game development, with cost benefits already emerging. Looking ahead, the bank anticipates several catalysts for the company in the second half of 2026: 1) the launch of new games, expected to generate RMB 5.9 billion in revenue over 12 months; 2) strong profit growth, with operating profit projected to grow by 15-20% for the remainder of the year; 3) a shift to primary listing in Hong Kong, which, if included in the Southbound Stock Connect, could enhance the diversification of investor capital flows.