Shanda trouble (SNDA)
Well, today it looks like Shanda (SNDA) has joined Netease (NTES) in the Chinese internet gaming doghouse.
These two seem to be at different points in their evolution -- Netease seems to be plateauing with their hottest games, while Shanda is well over the plateua with MIR II, whose use has already declined pretty significantly. And likewise, my Netease shares are still up a good 20% or so since my purchase, but even though I've averaged down once on Shanda I'm still significantly underwater on that position. I've written at greater length on both of these companies in the past and mostly believe in their continued growth, even though it's starting to look like the online gaming market in China is going to be nearly as fast-moving and hit-driven as Hollywood -- my last Shanda writeup is here, and a rather more optimistic Netease writeup after their last earnings release here.
I think both still look good to hold long term -- NTES because of their diversification and solid product pipeline in addition to their current slate of proven games that should continue performing well for a while, SNDA because they are just ramping up development now for several casual games and, hopefully early next year, a few new big MMPORPGs that could be hits. SNDA's secret sauce is their hardware/software offerings, including an Intel entertainment PC box that folks will use with their home TVs -- that could either be a money pit or a huge hit, I don't understand Chinese consumer culture well enough to know. But with the rapidly increasing Chinese internet audience and the increasing demand for entertainment content of all kinds in Chinda, I think the rising tide will do a lot to lift all boats in this sector -- especially these two companies that, though quite new to US markets, are old, experienced, diversified and large in comparison to most of their competitors in the marketplace.
I'm relieved to see Shanda's 10% or so drop today more than made up for by Rofin-Sinar (RSTI), Intuitive Surgical (ISRG), FARO (FARO -- which has had a ridiculous yo yo of a summer and fall but sure recovered a lot of the post-earnings drop today), Universal Display (PANL), and a few other good performers in the portfolio. That's the joy of diversification, I suppose -- SNDA and NTES haven't caused me any real short-term pain because others are taking up the slack.
Both SNDA and NTES are trading at very small premiums to the market -- that makes some sense because of the risk and volatility, but if you want growth this is significant growth potential at what I consider a significant discount for patient investors. I own and will hold both, though I think I'm overcommitted to this volatile sector and don't plan to buy any more at the moment, even at these low prices.
These two seem to be at different points in their evolution -- Netease seems to be plateauing with their hottest games, while Shanda is well over the plateua with MIR II, whose use has already declined pretty significantly. And likewise, my Netease shares are still up a good 20% or so since my purchase, but even though I've averaged down once on Shanda I'm still significantly underwater on that position. I've written at greater length on both of these companies in the past and mostly believe in their continued growth, even though it's starting to look like the online gaming market in China is going to be nearly as fast-moving and hit-driven as Hollywood -- my last Shanda writeup is here, and a rather more optimistic Netease writeup after their last earnings release here.
I think both still look good to hold long term -- NTES because of their diversification and solid product pipeline in addition to their current slate of proven games that should continue performing well for a while, SNDA because they are just ramping up development now for several casual games and, hopefully early next year, a few new big MMPORPGs that could be hits. SNDA's secret sauce is their hardware/software offerings, including an Intel entertainment PC box that folks will use with their home TVs -- that could either be a money pit or a huge hit, I don't understand Chinese consumer culture well enough to know. But with the rapidly increasing Chinese internet audience and the increasing demand for entertainment content of all kinds in Chinda, I think the rising tide will do a lot to lift all boats in this sector -- especially these two companies that, though quite new to US markets, are old, experienced, diversified and large in comparison to most of their competitors in the marketplace.
I'm relieved to see Shanda's 10% or so drop today more than made up for by Rofin-Sinar (RSTI), Intuitive Surgical (ISRG), FARO (FARO -- which has had a ridiculous yo yo of a summer and fall but sure recovered a lot of the post-earnings drop today), Universal Display (PANL), and a few other good performers in the portfolio. That's the joy of diversification, I suppose -- SNDA and NTES haven't caused me any real short-term pain because others are taking up the slack.
Both SNDA and NTES are trading at very small premiums to the market -- that makes some sense because of the risk and volatility, but if you want growth this is significant growth potential at what I consider a significant discount for patient investors. I own and will hold both, though I think I'm overcommitted to this volatile sector and don't plan to buy any more at the moment, even at these low prices.
Labels: SNDA
This article posted by One Guy @ 11/10/2005 04:43:00 PM 4 comments
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