NEW YORK (TheStreet) -- With China predicted to overtake the U.S. as the largest market for credit card companies by 2020, contributor Eric Jackson details how companies like Mastercard are trying to capitalize on China and whether investors should buy in.
By Eric Jackson Shanda came to prominence 10 years ago due to the popularity of its online games. The company was around long before anyone in North America had ever thought of the idea of online gaming. Due to Shanda's success in the space, it was able to spin-out Shanda Games(GAME - commentary - Trade Now) in 2009 as a separately listed company. However, Shanda (the parent) and Shanda Games have seen their respective prominences in this hotly competitive niche wane in recent years. Much like movies, online gaming is a "hits" business. Because Shanda has not been as strong in the space recently, the market has significantly discounted the company's stock. It's doubtful that analysts will upwardly revise their price targets for the stock until there is clear evidence that the company has a hot new game on its hands. As an investor, though, you have to look for earlier signs of an upward move in order to make money. Several signs indicate that Shanda's gaming business may be about to turn the corner. Its big game that's currently in development is called "Legend of the Immortal." This game was designed by a small, core team within Shanda. Shanda's management has recently said that it will be to Shanda what Mickey Mouse is to Disney (DIS - commentary - Trade Now). That's quite a comparison. The player community within China is equally excited about the game. [*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]
RealMoney Contributor
2/28/2011 1:45 PM EST
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Shanda Interactive Entertainment (SNDA - commentary - Trade Now) will report its earnings before the market opens tomorrow morning. Though Shanda has become lost in the shuffle of other Chinese technology names, 2011 could prove to be a good year for its stock. Several positive trends are blowing at the company's back. Moreover, the overlooked nature of the stock could play in investors' favor.
In this piece, I have highlighted some of the trends and initiatives that are helping Shanda along. Followers of this stock should pay attention to updates during tomorrow's conference call.Online Gaming
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NEW YORK (TheStreet) -- Contributor Eric Jackson details Best Buy's plans to restructure in China and his outlook on playing the stock.
, On Thursday February 24, 2011, 3:00 pm EST Amid all the recent attention that major Chinese Internet companies have been receiving, one has been left out of the discussion: NetEase.com. That is, until last night. The company announced some very strong results that propelled the stock to a big jump this morning. Here's what you need to know about the company and why you might want to take a second look. NetEase.com is one of the first-generation Chinese portals from 10 years ago, along with Sina and Sohu -- China.com never made it past the dot-com bubble. NetEase.com, which actually uses the URL "www.163.com" in China, has quietly been growing its revenue over the last few years, benefiting from the growth of the Chinese Internet market. Annual revenue went from $303 million in 2007 to $550 million in 2009. In last night's earnings report, we learned that annual revenue in 2010 went up to $857 million. That's quite a nice ramp. Net profit for fiscal 2010 was $339 million, up from $173 million in 2007. In other words, net margins were 40% last year on a billion-dollar business. The top-line fourth-quarter numbers for NetEase were 12% higher than what Wall Street analysts were expecting. This growth came from a boost of 13% from growth in online games quarter on quarter and 44% from online advertising in the quarter. This surge in advertising growth was apparent in Sohu's results a few weeks ago. That surprise from Sohu led to a one-month gain of 22% while the Nasdaq has basically been flat. This growth in online advertising will likely take center stage next Tuesday when Sina announces its quarterly results. It would be hard to believe that it won't ride the same rising tide to a strong quarter. NetEase said that for the rest of 2011, it expects strong advertising demand to continue. The company specifically called out the auto, Internet services, consumer electronics, apparel and food and beverage industries as areas where it is seeing the greatest demand. The company will continue to push its games. It is preparing to launch Starcraft II and Cataclysm. It also hopes to make inroads in online air ticketing (although this is never a business with great margins). NetEase doesn't have a shiny new microblogging tool like Sina's Weibo site. It's also not nearly as well known in the U.S. as Sohu. However, its anonymity is part of the reason you might want to take a closer look here. The stock jumped 10% this morning, as the Street was caught off guard by the positive results. However, even with that gain, NetEase is up 25% in the last year. Even though that beats the Nasdaq's return of 22% over that same period, it vastly trails the 66% one-year return from Sohu and the eye-popping 112% return from Sina. NetEase -- again, with this morning's move included -- is selling at a forward price-to-earnings ratio of 15x for a company that has grown its earnings by 25% a year for the last three years. Sina's forward P/E ratio is 38x. NetEase also has an enterprise value to EBITDA ratio for the last 12 months of less than 11x. Sina's is 44x. The low-profile nature of NetEase -- and its lagging stock price compared with its peers -- is a reason you might want to own the stock. In the worst-case scenario where it continues to lag its peers, you still have a good chance of beating the U.S. market's returns. But you might want to use these positive results to also re-examine Sohu. Despite its 66% move in the last 12 months, Sohu is still very "cheap" compared with Sina, with a 15x forward P/E and a trailing enterprise-value-to-EBITDA of less than 9x. Also, Shanda Interactive is announcing its quarterly results on Wednesday. Shanda is another value-play Chinese stock like NetEase. Shanda was once a leader in the online gaming space, but it has since been forgotten. Expectations are low, and the stock is cheap and has been bumping along $40 for several months. An upside surprise would give a boost to the stock. NetEase's 12% increase in online gaming revenue is a good sign for Shanda. Finally, don't forget BitAuto, which will release its earnings on March 3. It has an auto listing revenue model, rather than a heavy portal advertising model, but it might also benefit from a healthy auto space in China. Please note that due to factors including low market capitalization and/or insufficient public float, we consider BITA to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices. Eric owned SINA and SNDA at the time of publication.
By Eric Jackson, Senior Contributor
NEW YORK (TheStreet) -- The Chinese government and a chorus of US critics have criticizedFederal Reserve Chairman Ben S. Bernanke's "quantitative easing" (QE2) program since its announcement last November as a direct cause of white-hot commodity inflation.
[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]
Sphere: Related ContentContributor Eric Jackson says China's inflation is white-hot and has more to do with past actions its own government has taken than Ben Bernanke's QE2. Swift action is needed this year by the Chinese government to get the problem under control
Contributor Eric Jackson says there's only one company big enough to buy Facebook: Apple (AAPL). The combination would be a potential Google (GOOG) killer and too intriguing for Mark Zuckerberg to say no.
Contributor Eric Jackson says that NXP Semiconductor (NXPI) is perfectly position to ride the Near Field Communication (NFC) trend this year allowing your mobile device to do mobile payments.
By Eric Jackson
NEW YORK (TheStreet ) -- Apple(AAPL_) currently has a $315 billion market capitalization, with $60 billion in cash on its balance sheet. Analysts speculate it will use the money to start paying a dividend, do stock buybacks, or do an acquisition. There is one company that should be on the top of Apple's shopping list: Facebook -- and Apple should be willing to spend up to $100 billion to get it.
[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]
Sphere: Related ContentContributor Eric Jackson explains that in the disdain for the Internet company's stock, the true value of Taobao and Alipay is being missed.
By Eric Jackson
NEW YORK (TheStreet) -- I have had a love-hate relationship with Yahoo!(YHOO_) for five years now. I have always thought the stock was undervalued and primed for a turnaround that could unlock value. That's why I longed the stock and led an activist campaign against it. Unfortunately, even though the campaign resulted in former CEO Terry Semel quitting in 2007, the company's board muffed the chance to sign a deal with Microsoft(MSFT_) leading to the company's stock price to collapse. It's really never recovered.
[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]
Sphere: Related Content, On Thursday February 17, 2011, 2:30 pm EST Near field communication (NFC) is a new technology that's getting some buzz from the Mobile World Congress that just took place in Barcelona. It seems like every major phone vendor was discussing how it planned to incorporate NFC into its phones this year. Over on the flagship site, I discussed yesterday how Apple might incorporate NFC into their future iPads and iPhones. Apple has not disclosed any of its plans for NFC, but the company hired a well-known product manager away from startup mFoundry to head up Apple's NFC efforts last fall. The majority of the media focus on NFC has had to do with payments. We will soon be able to use our phones to swipe at some point-of-sale machine at a cash register, and the NFC technology will link the payment to some account you designate. Believe it or not, you will be able to buy phones in the next year that claim they have NFC technology, but it will be no more than an extra sticker they've put on the package. The problem with that version of NFC technology is that it isn't as secure as most of us would like when our money is on the line. The robust version of the service that all the major phone manufacturers will roll out this year uses NFC-enabled semiconductor chips. The leader of the pack in the space is NXP Semiconductors NV . NXP was spun off from Philips last summer. The stock has some big-name private-equity firms and hedge funds behind it, including KKR, Bain Capital, Silver Lake, Third Point and OZ Management. NFC was discussed as a phone feature last year, but it definitely was not on the front burner. Many thought of it as an incremental feature to the product, like a front-facing camera. However, as NFC has grown in popularity among phone makers, the stock of NXP has increased. It's now doubled since its IPO last August. This week in Barcelona, Google and Research In Motion both announced support for NFC. Google is definitely using NXP chips in its latest version of the Android operating system. RIM didn't give out any details on what it might use at the chip level. Until a few months ago, RIM hadn't shown much interest in NFC, except maybe with sticker support. Back in 2009, RIM declined to take part in a major NFC trial in Canada sponsored by Visa and the Royal Bank of Canada . On Tuesday, NXP released its fourth-quarter results and first-quarter guidance. Some were hoping for big guidance that would propel the stock forward and perhaps tip off that the company would be supplying Apple's new products this year. We didn't get that specificity or huge guidance, but the outlook was bright -- and certainly management is being conservative here. NXP said that 70 million NFC-chip-enabled phones would be sold in 2011 and 120 million would be sold in 2012. That's huge growth ... and probably understated. As the leading player in the space today and with a partnership already in place with Google, NXP looks to be well positioned to capture most of the growth in this nascent segment. Rumors have swirled for months that Apple will choose NXP as its NFC supplier. We'll have to wait and see. Beyond payments, NFC technology allows you to tap your phone to another device to share information; you can wave your phone near an item at a store to see deals or special information; and NFC-enabled phones will let you "check in" on various platforms. We're going to see many new location-based applications written for phones because of this technology. Perhaps because there wasn't an Apple-specific announcement on Tuesday's earnings call, NXP's stock price traded down a little afterward. But the buyers came out in droves on Wednesday -- the stock had one its biggest-volume trading days in its short life as the stock jumped about 10%. The jump was partially spurred by higher targets and positive statements from Goldman Sachs and Credit Suisse; both analysts were bullish on the company's future growth ramp. It won't be an open market for NXP. Both Broadcom and Qualcomm have made small NFC-related acquisitions in the past few months. They will compete hard to win in the space. There are also smaller competitors like On Track Innovations , which already has relationships with Visa and MasterCard . But NXP is definitely in the sweet spot to pick up most of the new growth. It will increasingly be an attractive acquisition candidate if growth continues to pick up. This stock is definitely one to watch for the next year.
Contributor Eric Jackson says Apple (AAPL) has its eye on getting into the mobile payments market thanks to Near Field Communication technology. They could be a major threat tobig credit card companies and EBAY's PayPal unit.
Contributor Eric Jackson says JDS Uniphase (JDSU) is back. It's selling the gear to help telcos keep up with bandwidth demands and has the gesture components powering Microsoft (MSFT) Kinect.
By Eric Jackson
NEW YORK (TheStreet ) -- When you're a $330 billion market cap company, you need big things to move the needle. Apple (AAPL_) knows that.
[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]
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