0NTES.US Overview

UBS Research Report: UBS has released a report highlighting its preferred Chinese companies, all rated as Buy, with new additions including SYTECH, DONGFANG ELEC, and ENVICOOL.

Stock Performance: The report notes significant stock movements, with DONGFANG ELEC seeing a 15.117% increase, while companies like SUNGROW POWER and NetEase experienced declines.

Short Selling Data: The report includes short selling statistics, indicating high short selling ratios for several companies, such as HORIZONROBOT-W and ZIJIN MINING.

Market Insights: Related news from CICC suggests that increasing risks of power outages in Europe and the US may create opportunities for power equipment providers.

Commodity Price Outlook: UBS forecasts a 9% rise in global commodity prices by 2025, with many Chinese companies facing the choice of raising prices or accepting lower margins due to higher input costs.

Market Dynamics: Companies are more inclined to raise prices this year, which could lead to a positive inflationary cycle, but may also result in decreased sales volume and lower margins if prices are too high.

Investment Strategy Adjustments: UBS has downgraded several sectors, including software and consumer electronics, due to high valuations and input cost concerns, while maintaining a neutral stance on real estate.

Top Investment Picks: Despite sector downgrades, UBS identifies Tencent and Alibaba as key opportunities for capitalizing on China's AI and LLM monetization potential.

Global Commodity Prices and Chinese Companies: Commodity prices rose 9% last year and continue to increase, leading Chinese companies to face the choice of raising prices or accepting lower margins, with many opting for price increases this year.

Potential Market Outcomes: The Chinese stock market may experience a pivotal moment in the second half of the year, with the possibility of reflation due to rising inflation expectations or deflation if company earnings expectations decline.

UBS Investment Portfolio Adjustments: UBS downgraded several sectors, including software and consumer electronics, due to concerns over AI disruption and high input costs, while maintaining a neutral stance on real estate.

Focus on AI Monetization: Despite the downgrades, UBS sees Tencent and Alibaba as key players for capitalizing on China's AI and large language model monetization opportunities.

Morgan Stanley's Forecast Adjustment: Morgan Stanley has reduced its forecast for NetEase's (NTES-S) game business revenue for 2026-27 by 2.1% due to a delay in the revenue recognition cycle, leading to a 4.2% cut in non-GAAP operating profit forecasts.

Earnings Per Share (EPS) Impact: The adjustments resulted in a decrease of 3.9% and 4% in Morgan Stanley's adjusted EPS forecasts for NTES-S for 2026 and 2027, respectively, with a new 2028 EPS forecast introduced at RMB73.33.

Target Price Revision: Following the earnings forecast changes, Morgan Stanley lowered its target price for NetEase from USD168 to USD154 while maintaining an Overweight rating.

Short Selling Data: As of February 20, 2026, short selling for NTES-S was reported at $142.58 million with a ratio of 7.935%.

JPMorgan's Target Price Adjustment: JPMorgan has lowered its target price for NetEase (NTES-S) from HKD295 to HKD280 and for NetEase (NTES.US) from USD190 to USD180, due to a 3% reduction in the 2026 EPS forecast linked to delays in new game launches.

Game Launch Delays: The report indicates that the launch of "Sea of Remnants" is now expected in Q3 2026 (previously Q2 2026) and "Ananta" in 1H 2027 (previously 2H 2026).

JPMorgan's Market Positioning: Despite the target price reduction, JPMorgan maintains an Overweight rating for both NTES-S and NTES-US, positioning NTES-S as a top pick in China's digital entertainment sector over a 6- to 12-month outlook.

Competitive Landscape: JPMorgan suggests that KUAISHOU-W may outperform NTES-S in the short term due to its focus on generative AI and related themes.

Stock Performance: NTES-S (09999.HK) has seen a decline of 3.949%, with short selling at $186.98M and a ratio of 21.908%.

Broker Ratings and Target Prices: Ratings from three brokers for NTES-S include JPMorgan (Overweight, $295), Goldman Sachs (Buy, $257), and Jefferies (Buy, $246).

4Q25 Financial Results: Multiple brokers reported that NTES's 4Q25 revenue and net profit missed expectations, with concerns over revenue recognition and investment losses.

AI Integration: Morgan Stanley highlighted NTES-S as a pioneer in AI adoption within the gaming industry, viewing AI as an enabler for growth despite recent financial setbacks.