Last year the company changed its business model from pay to play (charged based on subscription) to free to play, pay for some cool items. Investors seemed skeptical and slammed the stock. Now after few quarters, it seems the new business model is working and more people are joining the bandwagon. Recent results shows that the company is growing revenue fast and still has a lot more room to grow (gosh, only 10% or so of Chinese has access to internet). EA's recent acquisition of the 9 (NCTY) may be a proof that the sector is very attractive. Considering the growth potential, I think current valuation multiples are still reasonable. But competition may be heating up, and I am guessing the life cycle of some games may be getting shorter. And it's still unknown how new regulations regarding virtual money in China will affect the company's growth and bottom line. However, I think the potential reward still outweigh the risk for now.
$30.02 (05/23/07)
