Chinese Internet Stocks
February 24, 2007 12:10 am
Recently on a post from the blog Seeking Alpha, there was a discussion about the upcoming earning from NetEase ( NTES ). The author, Daniel Vlad, fet that there is a chance that the company may post good numbers in its Feb 26th, 2007 announcement. Here is my reply:
Have you seen that there seems to be a problem in China? The Chinese government is resorting to electro shock therapy to get youngsters off of their internet addiction! What does this say for the future of companies like NTES, SNDA, BIDU and SINA? The fact is that while there has been a great amount of interest surrounding all things China, I question how many of thee companies will survive with such meager profits.
For example, Baidu, has been long been said to be the “Google of the East”. (NASDAQ:BIDU) Yet, even as the stock ran up to $130 recently, the earning are relatively low as compared to their western counterparts. The reason that we have seen such a run up in the post 2000 internet boom from companies in the internet space is that we have been amazed with their earnings power from advertising and other sources. Most of the companies that are in the Chinese Internet Sector have revenues from a limited area and rely on the sheer mass of the Chinese Internet citizens to each spend a small amount. Things can change in a hurry over there…!
NTES is going to report and while it may wow investors, it is a good idea to sit back and look to buy in after the news, rather than stick out your neck and enter a position before any announcement.
The Disciplined Investor